SAP Safety Stock

Safety Stock
Safety stock which is held that is designed to account for variability in forecasting and variability in supply. It is greatly misunderstood and misused in industry where it is often managed in a capricious manner.
understand First about safety stock…it is an operational control, it is not an executive control. Executives set the overall objectives and financial allocations and objectives of the company. Safety stock needs to be set by the owners of the business – or those close to product management and planning and no one else. As soon as executives begin to interfere in safety stock in order to meet short term financial goals.

Safety Stock will be= {Z*SQRT(Avg. Lead Time*Standard Deviation of Demand^2 + Avg. Demand^2*Standard Deviation of Lead Time^2}