I am analyzing taking branded parts and non-branded parts that are otherwise identical and ordering them all as un-branded (we are potentially going to brand them ourselves instead of our supplier doing that for us). My only hang up regarding this analysis is what what will happen to the new safety stock numbers we will need to carry to maintain the same service level and assuming all other factors are the same (forecast, leadtimes, cost of goods, etc.) I have been told to use 32% as a safety stock reduction after adding the two safety stock numbers together as that is what the reduction "rate" should come to when doing macro SS calculations.
- This rate of 32% is apparently based on an equation to determine the new safety stock numbers (apparently common - maybe someone knows it; I would like to know it if there is such an equation so I can try it for these specific parts).
- Any other thoughts on the correct way of calculating the proposed safety stocks? I suppose I could combine the forecasts together and run through a safety stock calculator to determine the new safety stock numbers for each new proposed part. that seems more logical... but I want to understand this apparent equation if there really is one.
I was able to determine the answer to my question on my own per this article about the Square Root Law of Inventory theorized by Maister (1976).
Hope others who are in similar situations find this useful.