I write in my blogs and the documentation on our optimization projects about "The old paradigm and the new..." by which I suggest, in a nutshell, to use buffers instead of a static safety stock. And using some Factory Physics insights we know that three buffers develop when variability is present - no matter what you do! You have two choices to deal with variability: either you wait until it comes and deal with the buffers that will develop then or you plan ahead and build a combination of the buffers time, inventory and capacity so that the incoming variability can be absorbed... to the extend of the service level you have set. Demand Driven MRP has taken an approach to further define these three buffers and how you can plan for them. At bigbyte (www.bigbytesoftware.com) we have then taken their approach and made it our focus to find away to use this concept in our system of Effective Materials Planning
Let's first look at the inventory buffer:
The time buffer is the least intuitive to set up in SAP. You'll have to carefully evaluate how you want to set up your lead times (In-House Production Time, Planned delivery Time and Total Replenishment Lead Time) as, on one hand, if your lead time is too long you'll raise your inventory levels and on the other when the lead time is too short you're generating tons of exception messages.
Get service level agreements with your management and set them rigorously. This is another big discussion point which exceeds the capacity of this blog but nevertheless very important.