The impact of safety stock on service level in multi-level material requirements planning (MRP) systems

This paper will investigate the impact of safety stock on the service level in multi-level MRP systems. We will also examine how forecasting models and freezing proportion influence the selection of the coverage method and safety multipliers. A computer model is used to simulate the forecasting, master production scheduling and material planning activities in a company that produces to stock and the production activities are managed by multi-level MRP systems. The simulation output is analyzed to evaluate the impact of safety stock methods on the service level of MRP system. The result of the study shows that using safety stock can help to improve the service level. Forecasting model used and the freezing proportion influence the optimal level of safety stock. Guidelines are developed to help MRP managers determine the proper safety stock level to improve.