Safety stock vs. reorder point in Business Central

I very often get the question “what is the difference between safe stock and reorder point”, and I usually use this illustration.

The planning will try to replenish the item on the starting date of the Calculate Regenerative Plan, therefore the starting date must always be in the future to make the plan realistic. How long into the future? that is up to the individual company and the planning horizon they have set. Setting up both a safety stock quantity and a reorder point with a reorder quantity, will trigger the following actions:

  1. Firstly, the planning will always try to cover the safety stock asap, and being below the safety stock will always create a line in the planning journal with an Exception If it cannot be combined with other replenishments at the same date, it will create a separate line with the safety stock quantity
  2. Secondly, the inventory level is well below the reorder point and that will trigger a friendly reminder to replenish the item
  3. Since the replenishment has been triggered, a replenishment document is created with the reorder quantity
  4. Next time the inventory level goes below the reorder point, another friendly reminder to replenish the item is issued
  5. The quantity between the reorder point and the safety stock must be large enough to cover the expected consumption in the same period that is takes to replenishing the item (shipment time). The planning will never plan to touch the safety stock, it considers that stock unavailable. It is possible to manually use the safety stock, and then the planning will make another exception line next time it is planned
  6. Otherwise, the item is replenished as usual with the reorder quantity

Warning, Setting a safety stock will increase the inventory value because it will create a stock of unavailable items.

This is one of the chapters in my upgraded book: Manufacturing with Business Central.

The book will be available later this summer at https://dynamicsbookstore.com.

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