Excess Inventory Hiding Behind the IO Calculation!
When MOQs, pack sizes, or supplier constraints force your order quantity above EOQ (which is probably most SKUs, most of the time), you’re already carrying more cycle stock than the textbook assumes.
That extra inventory isn’t just cycle stock. It’s a buffer.
Most IO tools calculate safety stock in isolation, oblivious to actual lot size. They spit out the same SS number whether you order Q or 2Q.
The shaded band is safety stock you’re carrying that isn’t earning its keep. Cycle stock has already done that job. You’re paying twice for the same protection; and holding onto a reorder point that fires earlier than needed…
Ironically the lot size impact is hidden in SAP IBP under an obscure key figure. Most implementers assume a lot size of 1 (actually the default value SAP uses is 10).
SAP IBP, Kinaxis, o9, Blue Yonder – check what your engine does on the IO module with buffer stock or ROP when you have MOQ > EOQ.
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