Answer:
Safety Stock is the quantity of stock held to satisfy unexpectedly high requirements in the stocking-up period (e.g. Raw material, Purchased parts, semifinished goods, spare parts etc. which hampers your smooth production).
The purpose of the safety stock is to prevent a material shortage from occurring during production .
In order to determine the safety stock level, you must first specify the risk of a material shortage and also the desired service level.
Usually the safety stock will not be used in production.
The purpose of the safety stock is to prevent a material shortage from occurring during production stage .
NO ONE LIKES TO KEEP FINISH PRODUCT IN STOCK as this affects your revenue.
In make to stock scenario sales orders are fulfilled from stock.
In make to order production is planned for specific sales order only.
Therefore, many business do not
keep safety stock for FINISH MATERIAL.
However, do note that every business are unique and there are companies which do used safety stock for F.G.
We can make system to consider the safety stock for MRP and exclude it during delivery.
This has to be addressed with the scope of check with checking group (01 or 02 or whatever you are using) and checking rule B.
In this combination exclude the Safety stock from availability check in the Material Master.
Typically, you need finished goods safety stock to cover the variations in demand, which can never be avoided in actual practice. The decision is also related to the type of industry or product. In other words, if for one moment you assume that you can forecast demand 100% accurately, then you need no safety stock at all the finished goods level.
The final answer seems to be dependent on your company whether do they need safety stock both at finished level and the component level.
Both of them are dependent on the variability of usage or demand and on the lead time.
