Gas Light Signal

Safety Stock vs DDMRP Buffer

One of the most common questions I get when conducting a DDMRP training is: “Isn’t this just Safety Stock?”  And I suppose, in a way, it might be. Or maybe more accurately, it is what many believe Safety Stock to be. 

Is there a gap between what you think Safety Stock is and what safety stock actually does?

  • “We put Safety Stock into the system to prevent variability from causing a stock out.”

Agreed, that is the intent.  But that’s not the outcome. If it was, we would have no stock outs.

  • “Safety Stock is an amount of inventory that we always intend to have. Like a Safety Stock of 10 would mean we don’t want to have less than 10.”

Full agreement. It redefines Zero. And when we fall below, MRP reacts like we stocked out.

  • “Traditional MRP is designed so that we never fall below the Safety Stock level.”

The expectation from MRP is that we will never fall below the safety stock level. But it’s only designed to keep our inventory above that level if we have full visibility to all variability prior to falling within lead time. It is mainly designed to provide exception reports or expediting directions when the balance will fall below safety stock. It’s usually more of an alarm bell after it’s too late.

Many people think Safety Stock has similarities to a DDMRP buffer.  Perhaps the reality is that we’ve convinced ourselves that Safety Stock does what a DDMRP buffer does. It’s what we wish Safety Stock was.  But, if safety stock was such a great solution, why do we run out of stock even when we have safety stock set at the level we choose? And why are our reports full of expedites to fulfill safety stock?  Perhaps all we’ve done is convince ourselves the solution doesn’t exist.

Here’s a story you can all relate to, I hope.  Consider my car. More specifically, the gas tank. 

I have a fuel gauge; I assume everyone does.  I can look at it whenever I want and know the amount of gas relative to the size of the tank.  That simple concept allows me to plan my day or my route accordingly. But I also have an “alert” that tells me when I have 50 miles worth of gas left. Why the two systems?

Maybe a better question is this: Would you buy a car with only the alert system (no gauge)?

Because really, the Alert is like Safety Stock.  Most of us can’t watch all our parts all the time, so we rely on the Alert (warning when we hit safety stock, or when we are about to).

And since I imagine none of you would be happy without a gas gauge, then I ask you, “Why do you think Safety Stock is sufficient to manage millions of dollars’ worth of inventory?”

A DDMRP Buffer has both the gauge and the alert system in one. Safety stock tells you when you’re in trouble, and then you must figure the rest out.  DDMRP has a gas gauge on all buffered parts and recommends what actions to take.

Safety stock isn’t getting the job done – DDMRP is the change you’ve been waiting for.

John Melbye,

Become Demand Driven

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