Safety margins

This article describes how safety margins work during master planning.

Safety margins overview

Safety margins provide buffer time beyond the normal lead time. For example, you might need to unpack or inspect material after it arrives from the vendor. You can't just add the extra time to the purchase lead time, because that approach gives extra buffer time to the supplier. Instead, use the receipt margin to ensure that the supplier delivers earlier. The receipt margin provides buffer time so that you can handle the goods internally.

Three types of safety margins exist:

• Reorder margin – The buffer time for placing the supply order
• Receipt margin – The buffer time for handling incoming supply
• Issue margin – The buffer time for handling shipments

The following illustration shows how these safety margins apply over time.

All margins are defined in days. The default value, 0 (zero), indicates that no margin is applied. If you set up multiple margins, they all add to the total time from the supply order date to the demand requirement date. For example, a setup has no lead time, and all three margin types are set to one day. In this case, three days exist between the supply order date and the demand requirement date, so if the order date is July 1, the requirement date is July 4.

Receipt margin

The receipt margin is probably the most commonly used of the three safety margins. The system applies it to the delivery date and calculates backward from the requirement date. In other words, you should receive the products the specified number of receipt margin days before you need them.

The following illustration highlights the receipt margin.

The receipt margin typically acts as a buffer to ensure time for warehouse registration or other time-consuming processes that the system doesn't capture as part of the general lead time. For purchases, one benefit is that the delivery date of the purchase order moves forward accordingly. If you increase the lead time instead of using a safety margin, the vendor still needs to deliver at the last minute.

The receipt margin doesn't change the requirement date of the supply. Therefore, you don't directly see the receipt margin when you compare requirement dates for demand and supply (for example, on the Net requirements page). For example, say the receipt margin is four days and a purchase order line is planned for receipt on the 15th of the month. Master planning calculates the adjusted receipt date as the 19th of the month.

A receipt margin isn't applied when on-hand inventory is used as the supply. All on-hand inventory is assumed to be available immediately, regardless of when you actually received it.

Reorder margin

The following illustration highlights the reorder margin.

The reorder margin adds time before the item lead time for all planned orders during master planning. Therefore, it ensures extra time for placing a supply order. This margin typically acts as a buffer to ensure time for approval processes or other internal processes that are required during the creation of supply orders. The reorder margin goes between the supply order date and start date.

Issue margin

The following illustration highlights the issue margin.

During master planning, the system deducts the issue margin from the demand requirement date. This deduction helps ensure that you have time to react to and ship incoming demand orders. This margin acts as a buffer to ensure time for shipment and related outbound warehouse processes.

When you apply an issue margin, the related supply and demand requirement dates don't match. Instead, they differ by the issue margin, because the issue margin is added between the supply requirement date and the demand requirement date.

Set up safety margins

Define safety margins

Set safety margins on both the coverage group and the master plan. The system adds these margins together. For example, if you set a receipt margin of two days on the coverage group and three days on the master plan, the effective receipt margin is five days.

Set the margin on the master plan when you want to simulate longer lead times or uncertainty for a specific plan, but without affecting the daily planning.

Coverage group safety margins

To apply a safety margin to a coverage group, follow these steps:

1. Go to Master planning > Setup > Coverage groups.

2. In the list pane, select the coverage group.

3. On the Other FastTab, in the Safety margins in days section, use the following fields to set the required safety margins (in days):

   • Receipt margin added to requirement date
   • Issue margin deducted from requirement date
   • Reorder margin added to item lead time

Master plan safety margins

To apply a safety margin to a master plan, follow these steps:

1. Go to Master planning > Setup > Plans > Master plans.

2. In the list pane, select the master plan.

3. On the Safety margins in days FastTab, use the following fields to set the required safety margins (in days):

   • Receipt margin added to requirement date
   • Issue margin deducted from requirement date
   • Reorder margin added to item lead time

Define whether calculations are based on calendar days or workdays

Set all safety margins to calculate based on either calendar days or workdays.

1. Go to Master planning > Setup > Master planning parameters.
2. On the General tab, in the Safety margins in days section, set the Working days option to Yes to calculate margins based on working days. Set the option to No to calculate margins based on calendar days.

For example, a calendar is open from Monday through Friday and closed from Saturday through Sunday. If there's a receipt margin of one day, a requirement date on a Monday produces a delivery date on the previous Friday, because Saturday and Sunday aren't working days.

The calendar that determines the working days depends on the setup and the supply type. The calendars of the coverage group, the warehouse, and the vendor control which days count as working days.

The system can handle a setup where one or more calendars are defined. The following subsections describe the possible combinations that you can use to control the result.

Calendar that is used for the duration

The defined calendars control the actual total lead time in calendar days, from the supply order date to the demand requirement date. The system uses the following calendar prioritization:

• Purchase lead time – Only the coverage group calendar is considered.
• Receipt margin – If a coverage group calendar is defined, the system uses it. Otherwise, the system uses the warehouse calendar.
• Issue margin – If a coverage group calendar is defined, the system uses it. Otherwise, the system uses the warehouse calendar.
• Order margin – Only the coverage group calendar is considered.

Calendar that is used for the final date

The following rules determine whether the planning engine can use a given date for a given date type:

• Purchase receipt date – If a vendor calendar is defined, the system uses it. Otherwise, if a coverage group calendar is defined, the system uses that calendar. If neither calendar is defined, the system uses the warehouse calendar.
• Transfer receipt date – If a coverage group calendar is defined, the system uses it. Otherwise, the system uses the warehouse calendar.
• Production receipt date – If a coverage group calendar is defined, the system uses it. Otherwise, the system uses the warehouse calendar.
• Demand issue open day – If a warehouse calendar is defined, the system uses it. Otherwise, the system uses the coverage group calendar.
• Order open day – The system uses a combination (intersection) of the coverage group calendar and the vendor calendar. Both calendars must be open to use the date. If only one calendar is defined, the system uses that calendar alone.

Calendar setup overview matrix

The following illustration presents a matrix that summarizes which calendars apply when safety margins are calculated. (Select the image to open a high-resolution version of it.) The following abbreviations and colors indicate where each type of calendar is specified:

• Coverage group (CG): Green
• Warehouse (WH): Yellow
• Vendor (V): Blue

Calculating delays

The system includes all three types of safety margins when it determines whether an order is delayed.

For example, an item has a lead time of one day and a receipt margin of three days. A sales order for this item is set as required today. In this case, the delay is calculated as lead time + receipt margin = four days. Therefore, if today is August 14, the four days of delay produces a delivery on August 18. The following illustration shows this example.

Issue margin and on-hand

Sometimes, the system doesn't apply the issue margin to an order when on-hand supply exists for an item. The reason for this behavior is that the on-hand supply doesn't have a date, so the system can't apply the issue margin.

This situation usually occurs when you sell an item that has an issue margin from a warehouse such as WH11. A transfer order from another warehouse such as WH13 replenishes the selling warehouse. In this case, one of the following situations could apply:

• If on-hand supply exists in WH13 – On WH11, the system applies the margin between the sales order date and the transfer order receipt date. However, on WH13, the date of the transfer order shipment is the same as the receipt date because there's on-hand supply, so the system doesn't apply any issue margin.

• If on-hand supply doesn't exist in WH13 – If there's no on-hand supply, and WH13 is to be replenished by other means (such as a purchase order), then the system applies the issue margin between the transfer order receipt date and the purchase order receipt date.

Soft issue margin (preview)

[This section is prerelease documentation and is subject to change.]

Soft issue margin causes the system to treat the issue margin as a preferred buffer rather than a hard requirement. Instead of always applying the full issue margin, a soft margin lets the system reduce it as needed to avoid pushing the requirement date into the future. Without soft issue margin, the system always applies the full margin, even when doing so delays a demand order.

The soft issue margin works as follows:

• If the full issue margin can be applied without causing a delay – The system applies the full issue margin, just as it does with the standard behavior. No change occurs.
• If the full issue margin would cause a delay – The system reduces the issue margin to the largest value that doesn't push the planned requirement date past the demand requirement date. The margin can be reduced to any value between zero days and its full configured value minus one day.
• If the order is already delayed (the demand requirement date is in the past) – The system ignores the issue margin entirely. The issue margin isn't included in the delay calculation. Instead, the difference between the demand requirement date and the planned order date is surfaced to indicate that the order can't be fulfilled on time.

This behavior applies independently at each level in the supply chain. If a bill of materials (BOM) structure includes both a finished good and a raw material, the system evaluates and adjusts the issue margin separately for each level.

Soft issue margin prerequisites

To use a soft issue margin, your system must meet the following requirements:

• You must be running Microsoft Dynamics 365 Supply Chain Management version 10.0.48 build 10.39.1837 or later.
• The feature named Soft issue margins with Planning Optimization must be turned on in feature management.

Enable soft issue margin for a coverage group

You enable soft issue margin at the coverage group level. To enable the soft issue margin for a coverage group, follow these steps:

1. Go to Master planning > Setup > Coverage groups.
2. Select the coverage group.
3. On the Other FastTab, set the Soft issue margin option to Yes.

Example 1: Issue margin is reduced to avoid delay

The following conditions apply in this example:

• The issue margin is 10 days on all items.
• Soft issue margin is enabled.
• Today's date is October 1.
• The Add the calculated delay to the requirement date for production orders option is disabled.

The demand requirement date is October 7. Without soft issue margin, the system applies the full 10-day issue margin at both the finished good level and the raw material level. Because only six days are available between today's date and the requirement date, the full margin causes a delay at both levels.

With the soft issue margin enabled, the system reduces the issue margin at both levels to the largest values that don't push the planned dates past the requirement date. The orders are planned without delay.

Example 2: Order already delayed, issue margin is ignored

The same conditions apply as in the previous example.

The demand requirement date is September 24. Without the soft issue margin, the system applies the full 10-day issue margin at both the finished good level and the raw material level, which further increases the delay.

With soft issue margin enabled, the system ignores the issue margin entirely at both levels because the demand requirement date is already in the past. The delay is surfaced as the difference between the demand requirement date (September 24) and the earliest possible planned order date (October 1). The issue margin doesn't add to the delay.

Greedy application across multilevel supply chains

The soft issue margin is applied greedily along the supply chain, starting from the demand side. The first level in the chain (closest to the original demand) consumes as much of the available issue margin as possible. Subsequent levels (further from the demand, closer to the supply source) receive whatever margin remains.

For example, consider a supply chain where warehouse WH12 fulfills a sales order at warehouse WH11 through a transfer, and a purchase order replenishes WH12. If you configure the soft issue margin for the item at both warehouses, the system first allocates as much issue margin as possible to the issue from WH11, the warehouse closest to the customer demand. The issue from WH12, which is further upstream in the supply chain, then receives whatever margin is still available without causing a delay.

Greedy allocation means that downstream operations (closer to the customer) are prioritized for margin, while upstream operations absorb the reduction.

Known limitations of soft issue margin

The greedy application of soft issue margins can lead to situations where the requirement dates set by the engine are too optimistic. When the engine applies the soft issue margin date, it doesn't yet know about potential delays that could occur further up the supply chain. Once the system encounters upstream delays and factors them into the plan, requirement dates aren't updated to account for delays compressing the soft issue margin.

Greedy application of soft issue margins can lead to situations where the requirement date of a planned supply is set too early. After the system accounts for delays, it shows delay days even though only the soft issue margin was compressed instead of delaying the demand.

Example of known limitation

The following conditions apply in this example:

• Today's date is May 18.
• An item P1 exists that is replenished by production orders.
• To produce item P1, a raw material R1 is required, which is replenished by purchase orders with a purchase lead time of three days.
• The soft issue margin is set to two days on P1 and R1.

A sales order for item P1 has a requirement date of May 22. A soft issue margin of two days is configured on P1. The system greedily applies the full issue margin and schedules a production order with a requirement date of May 20. The production order requires raw material R1, which also has a two-day issue margin and is scheduled with a requirement date of May 18.

However, the purchase order for R1 has a purchase lead time of three days. This lead time causes a three-day delay on the purchase order, which adjusts the planned date to May 21. The delay propagates up to the production order, which also adjusts to May 21. Because soft issue margin is enabled, the issue margin at the production level is compressed and doesn't add further delay. The delay also propagates to the sales order level. However, the system compresses the soft issue margin from two days to one day, so the sales order isn't delayed beyond May 22.

After delays are resolved, a discrepancy exists between the requirement dates and the planned dates. The requirement dates that were set before the delays were known are now too optimistic. The system doesn't retroactively adjust these requirement dates, which can result in delay days being shown even though the supply isn't delayed according to the soft issue margin. This behavior is by design and a known limitation of the soft issue margin feature.

Impact of known limitation

If delays occur and the system doesn't update the requirement dates, several other features that rely on requirement dates and delays might also be affected. For example:

1. Delay days
2. Actions
3. BOM/route selection
4. Trade agreements

Make sure to test this feature thoroughly to ensure that your intended use of soft issue margins is not affected by the known limitations.

Related information

• Calendars and master planning
• Calculate requested ship dates for purchase orders
• Improve scheduling engine performance
• Date and time parameters used by Planning Optimization