What is overload factor in SAP SCM-APO-CA-CDP - Characteristics-Dependent Planning?

SAP Term: overload factor

• Component: SCM-APO-CA-CDP

• Component Name: Characteristics-Dependent Planning

• Description: Factor used to set the bucket capacity of a block higher than the block capacity.

Smart SAP Assistant

• Key Concepts: 
  The overload factor is a parameter used in Characteristics-Dependent Planning (CDP) within the Supply Chain Management (SCM) Advanced Planner and Optimizer (APO) component of SAP. It is used to determine the amount of safety stock that should be kept in order to prevent stockouts. 
  
  How to use it: 
  The overload factor is set by the user and is used to calculate the safety stock for each product. The safety stock is calculated by multiplying the average demand for a product by the overload factor. For example, if the average demand for a product is 10 units per day and the overload factor is set to 1.5, then the safety stock would be 15 units. 
  
  Tips & Tricks: 
  When setting the overload factor, it is important to consider both the cost of carrying extra inventory and the cost of stockouts. If the cost of carrying extra inventory is too high, then a lower overload factor should be used. On the other hand, if stockouts are too costly, then a higher overload factor should be used. 
  
  Related Information: 
  The overload factor can also be used in conjunction with other parameters such as lead time and reorder point to determine when orders should be placed. Additionally, it can be used in conjunction with forecasting methods such as exponential smoothing or moving averages to more accurately predict future demand.