Safety Stock (SS):

Where an MRP procedure is used against forecast end-product demand there is a risk that the forecast may be inaccurate and therefore on these occasions more end products are required than had been anticipated for a given period. To protect against such a situation, it would be necessary to hold some safety stocks. Where customer requirements are concerned exclusively with end products rather than also being expressed in terms of components or parts, safety stock is best held at the higher levels within the bill of requirements structure, for example. at final sub-assembly or final product assembly levels. In these circumstances the MRP procedure itself tends to protect against shortage of lower- level items by generating them in time to meet the final master production schedule. Thus safety stock is normally held only at lower levels where customer demand may be expressed in terms of component parts as well as finished products.