MultiView LOGIC

Operations Support V7.0

TABLE OF CONTENTS
Table of contents............................................................................................................................1 Purpose of this manual..................................................................................................................2 efinitions.......................................................................................................................................! ABC anal"sis..................................................................................................................................# $N%11 & ABC anal"sis.................................................................................................................1' Net(or) flo( an* areas...............................................................................................................11 $N%12 & Net(or) flo( E+ent Summar"....................................................................................12 E,ceptional -uantit" threshol* le+el..........................................................................................1! Forecastin. for stoc) parameters an* contracts.......................................................................1/ Plannin.........................................................................................................................................10 1ulti&store +ersus principal stores confi.uration....................................................................12 3arious costs.................................................................................................................................21 4ierarch"......................................................................................................................................22 Or*er policies...............................................................................................................................2! 5eor*er point metho* 5OP........................................................................................................26 Economic or*er -uantit" EO%...................................................................................................2/ Consoli*ation of or*erlines.........................................................................................................20 Fi,e* or*er c"cle metho* FOC..................................................................................................22 5OP +ersus FOC polic"..............................................................................................................!1 1$N 1A7 polic".........................................................................................................................!! Spare parts...................................................................................................................................!6 Errors8 lo.ical aspects an* 9ser efinitions.............................................................................!: 5unnin. a pro.ram.....................................................................................................................!/ $N7'1 & Suppl" Statistics............................................................................................................!# $N7'2 & Sin.le eman* Statistics..............................................................................................!0 $N7'! & Stoc) Consumption Statistics.......................................................................................!2 $N7'6 & Customer Sales Statistics..............................................................................................6' $N7': & Forecastin......................................................................................................................61 $N7'/ & Consoli*ation ................................................................................................................62 $N7'# & 5eor*er Parameters......................................................................................................6! $N7'0 & Fi,e* Or*er C"cle FOC...............................................................................................66 $N911 & FOC Sche*uler..............................................................................................................6:

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MultiView LOGIC

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P95POSE OF T4$S 1AN9AL

When the general stores configuration suppl! an" "istri#ution networ$s ha%e #een "efine" the &a'orit! of reor"er pro#le&s can #e sol%e" auto&aticall! #! &eans of co&puter progra&s which use generall! a%aila#le statistical infor&ation. (his &anual ai&s to pro%i"e infor&ation a#out #usiness processes of in%entor! &anage&ent in or"er to run progra&s anal!sis an" reports calculate para&eters an" pro%i"e logistic operations an" "ecision support. Onl! after proper setup can progra&s anal!sis an" reports #e run. (he wor$ing of the progra&s can #e &o"ifie" #! constants an" tuning factors "efine" in the setup. (his &anual contains the progra& "escriptions relate" to opti&al reor"ering an" stoc$hol"ing of in%entor! for pro"uction or si&ulation. I)*01 + Suppl! statistics I)*0, + Single "e&an" statistics I)*0- + Consu&ption statistics I)*0. + Client sales statistics I)*0/ + 0ierarchical consoli"ation I)*01 + 2orecasting I)*07 + 3O456OP para&eters I)*07 + 2i8e" or"er c!cle In a""ition to logistic para&eter calculation the following ite& statistics are recor"e". 2irst5last custo&er or"er "ate (he total nu&#er an" 9uantit! of custo&er or"ers. 4uantit! per issue an" cu&ulati%e "istri#ution (he a%erage nor&al 9uantit! per issue an" "e%iation :%erage "ail! issue 9uantit! an" "e%iation ;p5"own !ear tren" signal Seasonal pattern signal Lu&piness signal Last 1, &onths total nu&#er of custo&er or"ers. Last 1, &onths total 9uantit! "e&an"e". Last 1, &onths turno%er %alue. Last 1, &onths nu&#er of #ac$or"ers. :<C Classification ite& #! nu&#er of custo&er or"ers :<C Classification ite& #! turno%er %alue :<C Classification ite& #! turno%er profit 38ception threshol" le%el Stoc$+out "ates an" perio"s Lea" ti&e "istri#ution :%erage weighte" lea" ti&e an" "e%iation :<C Classification suppliers #! or"er fre9uenc! an" %alue :<C Classification custo&ers #! or"er fre9uenc! an" %alue

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EF$N$T$ONS
(he logistics in%entor! &anage&ent s!ste& LOGIC ai&s to pro%i"e an opti&al logistics of "e&an"e" &aterials #! getting 1. ; the ri.ht item in the re-ueste* -uantit" of the re-uire* -ualit" in the ri.ht place at the ri.ht time ;

... an* ... 2. ; at the lo(est costs ;

E1AN

SO95CE

(his pro#le& in%ol%es the "efinition of a networ$ configuration presenting an opti&al structure through which the pro"ucts will flow fro& their source points to their "e&an" points an" "eter&ining what facilities shoul" #e use" how the facilities shoul" #e ser%e" how &an! there shoul" #e where the! shoul" #e locate" an" which transport ser%ices shoul" #e use" #etween the&. <alancing capital costs or"er processing costs costs of hol"ing stoc$ #uffers in stores cost of non+ser%ing of "e&an" transportation costs custo&er ser%ice targets "ictate how the pro"ucts flow through the networ$ an" which facilities stores nee" to #e use".

(he general &etho"s #! which the alternati%e configurations can #e e%aluate" on cost an" efficienc! is a planning pro#le& an" not part of opti&al reor"ering logistics =configuration an" planning>. (he proce"ures an" progra&s "escri#e" hereafter ai& at fin"ing opti&al reor"ering for a fi8e" configuration.

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In or"er to "eter&ine the opti&al or"ering con"itions 9uantities an" &etho"s for a gi%en stores configuration it is %er! i&portant to "istinguish the "ifferent t!pes of "e&an" to #e ser%e" an" "ifferent sources of suppl!. E1AN C1. ?irect "e&an"e" custo&er or"er C,. Custo&er or"er with planne" &aterial "e&an" "ate in future 31. Spare parts to repair #rea$"own 3,. Materials for planne" pro"uction or installation Supplier Manufacturer

SO95CE

(he "efinition that "e&an" shoul" #e ser%e" #! @the right ite& in the re9ueste" 9uantit! of the re9uire" 9ualit! in the right place at the right ti&e at the lowest costs@ lea"s to a pro#le& that has #oth spatial an" te&poral aspects. (he spatial aspect refers to the location of the in%entor! such as warehouse retail outlet "etail or su# store or supplier $ept "epot. (he te&poral aspect is one of a%aila#ilit! of the ite& through purchase or"er response ti&e or &aintenance of an in%entor! in stoc$ near the custo&er or short pro"uction 5 asse&#lage response ti&e. If ti&e is not critical e.g. for planne" &aterial re9uire&ents =C, 3,> with a planne" "ate far enough in the future to ensure that or"ere" &aterial will #e a%aila#le in ti&e.

E1AN

S9PPL$E5

If the ti&e aspect is %er! i&portant =C1 31> stoc$ can #e place" as a #uffer #etween the "e&an" an" the supplier in or"er to ser%e the "e&an" i&&e"iatel! fro& the stoc$.

E1AN

STO5E

S9PPL$E5

0a%ing a stoc$ i&plies a""itional stoc$ hol"ing costs =storage han"ling an" fi8e" costs> these are #alance" #! the i&&e"iatel! a%aila#ilit! of the ite&. :n a""itional factor #! which the stoc$ hol"ing can #eco&e econo&ic as co&pare" to ser%ing the "e&an" #! or"ering e%en if the ti&e aspect is not i&portant is gi%en #! the ratio of nu&#er of "e&an"s ser%e" fro& stoc$ to the nu&#er of or"ers nee"e" to replenish this stoc$. One purchase or"er &a! ser%e &an! "e&an"s an" onl! one inspection is re9uire".

E1AN

STO5E

S9PPL$E5

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MultiView LOGIC TO STOC< O5 NOT TO STOC<

Operations Support V7.0

In general it is econo&ical to ser%e the "e&an"s =C, 3,> #! or"ering unless A (he "eli%er! "ela! is %er! long or %aria#le A (he ite& is ine8pensi%e an" the nu&#er of "e&an"s per !ear is large enough to ensure an econo&ic #alance of stoc$ hol"ing costs %ersus or"ering costs A (he econo&ical penalt! of stoc$+out is %er! large. 0owe%er to ensure that the "e&an" plan "ate is &et it is reco&&en"e" that the ite& is or"ere" with a "esire" "eli%er! "ate sufficientl! long #efore the "e&an" plan "ate an" #e $ept in a "epot until "eli%er! on the "e&an" "ate. In general it is econo&ical to ser%e "e&an"s =C1 31> fro& stoc$ unless A ?eli%er! within ser%ice ti&e is ensure" #! the supplier an" relia#le A Costs of not ser%icing the "e&an" are low STOC< 3AL9E One of the &ost i&portant costs when $eeping an ite& in the stoc$ in%entor! is cause" #! the possession of the ite&. (he %alue of stoc$e" ite&s is not a%aila#le to the co&pan! or &a$ing an! profit unless the ite& is ser%e". (he 9uantities hol" in the in%entor! are therefore "eter&ine" as a #alance #etween ser%ice le%el possession costs an" or"er costs. (he 9uantities of reor"ering an" hol"ing in stoc$ are #ase" on "ifferent criteria for custo&er consu&ption an" spare parts. C15C, Custo&er or"ers 2orecast #ase" on consu&ption fro& stoc$ statistics 31. Spare parts to repair #rea$"own : &ini&u& le%el #ase" on pro"uction failure cost when the ite& is not a%aila#le E7CEPT$ONAL E1AN Ser%ing infre9uentl! "e&an"e" %er! large 9uantities fro& stoc$ will lea" to stoc$+outs an" low ser%ice le%els. (o ensure a nor&al ser%ice le%el when ser%ing these occasional %er! large "e&an"s %er! high safet! stoc$ 9uantities will #e nee"e". It is %er! econo&ical to separate these e8ceptional "e&an"s fro& the nor&al "e&an"s ser%e" fro& stoc$ an" ser%e these e8ceptional "e&an"s #! a special or"er fro& the supplier the so+calle" ?irect+Out.

E1AN

STO5E

S9PPL$E5

Special order for exceptional large demanded quantity

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4uic$er ser%ing with low han"ling costs can #e achie%e" #! placing su#+stores local outlets or self+ ser%ices stores near the pro"uction location or location of &aterial "e&an". (he costs of inter+ warehouse transfer are #alance" #! the lower han"ling an" "istri#ution costs an" the ratio of one transfer to nu&#er of re9uests ser%e" #! this transfer. E1AN Local STO5E STO5E E1AN Local STO5E S9PPL$E5

O5 E5 POL$C$ES Ite&s can #e supplie" to the store #! &eans of "ifferent or"er &etho"s or policies. (he #enefits of these "ifferent &etho"s lies in the fact that the! lea" to lower transport cost #! #un"ling the or"er+lines for the sa&e supplier or &anufacturer lower the stoc$ %alue #! 'ust in ti&e or"ering of the re9uire" 9uantit! of a single ite& or i&pro%ing the relia#ilit! #! or"ering on a agree" fi8e" "ate which can #e use" #! the &anufacturer in his pro"uction sche"ule.

S9PPL$E5 STO5E
1AN9FACT9 5E5

4$STO5= Beeping a supplier catalog an" suppl! histor! allows to acti%el! chose a&ong a large nu&#er of supplies an" selecting supplies opti&al &eeting preset re9uire&ents

E1AN

STO5E

S9PPL$E5 S9PPL$E5 S9PPL$E5

S9CCES FACTO5S (he success of &eeting the re9uire&ents of custo&er ser%ice can #e &easure" #! a nu&#er of critical success factors or $e! perfor&ance in"icatorsC Custo&er ser%ice le%el is "efine" as the ratio of the nu&#er of fulfille" "e&an"s ser%e" in ti&e an" the total nu&#er of "e&an"s Ser+ice le+el SL > fulfille* re-uests ? total re-uests Ser%ice le%el of <ac$or"ers or 6e9uests that can not #e ser%e" within the pre"efine" ti&e lea"s to unsatisfie" "e&an"s or <ac$or"ers. (he ti&e necessar! to ser%e the #ac$or"er is "eter&ining the ser%ice le%el of the #ac$or"er. BO ser+ice > a+era.e bac)or*er *ela"

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ABC ANAL=S$S
(he :<C anal!sis is use" to "ifferentiate ite&s into a li&ite" nu&#er of categories #! ran$ing the& accor"ing to a gi%en criterion such as nu&#er of custo&er or"ers sales profits &ar$et share or co&petiti%eness or nu&#er of #rea$"owns when the ite& is use" as spare part. ;suall! a s&all nu&#er of ite&s are contri#uting a high proportion of the sales %olu&e. (his "isproportionalit! #etween the percentage of ite&s in in%entor! an" the percentage of sales is so&eti&es referre" to as the 70+,0 principle although rarel! "o e8actl! ,0 percent of the ite&s represents 70 percent of the sales. @:@ ite&s are t!picall! the fast &o%ers @<@ ite&s the &e"iu& &o%ers an" @C@ ite&s the slow &o%ers. (o the stan"ar" :<C anal!sis for ran$ing , categories are a""e" @)@ an" @?@. (he categor! ) presents the recentl! intro"uce" ite&s which e8ist less then a !ear. (he categor! ? presents ite&s with no or Dero &o%e&ent or turno%er for the last 1, &onths. (he stan"ar" use" classification in categories #! "e&an" fre9uenc! or nu&#er of custo&er or"ers an" turno%er %alue together with their "efault threshol" %alues are "enote" #elowC : < C ) ? 2irst 70 E of the cu&ulate" %alue. )e8t 1/ E of the cu&ulate" %alue. Last / E of the cu&ulate" %alue. 6ecentl! intro"uce" less then a !ear. )ot &o%ing Dero criterion %alue.

(he threshol" %alues for the categories &a! #e change" in setup function I);0151 One can +isualiAe the ABC anal"sis8 b" assi.nin. to each member of the elements8 a siAe accor*in. to the criterion +alue :fter ran$ing sa&ple in groups =e.g. total criterion in first 1E ne8t 1E etc> an" calculate the cu&ulati%e "istri#ution. F/E If all &e&#ers are e9ual 70E one gets after ran$ing e9ual criterion %alues first 0'@ > 0'@ criterion ne,t 1:@ > 1:@ criterion last :@ > :@ criterion

If the &e&#ers are )O( e9ual one fin"s after ran$ing the first 70 E is alrea"! reache" in the first /E of all the &e&#ers.

F/E 70E

first :@ > 0'@ criterion

ne,t 1:@ > 1:@ criterion

last 0'@ > :@ criterion

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(he :<C anal!sis can #e use" for a wi"e range of purposesC so&e e8a&ples are gi%en #elow. Barehouse operation efficienc" Ph!sical grouping off ite&s with a high issue fre9uenc! #! :<C anal!sis #! "e&an" fre9uenc! in locations in the %icinit! of the "e&an" areas e.g. the counter in a har"ware store &a! facilitate an" re"uce the pic$ing wor$loa" an" lea" to shorter a%erage "istances an" pic$ing ti&es.

C Pic$ing ?istances

< :

< :

< :

Counter Custo&er ?e&an"

Countin. efficienc" an* *ata accurac" (o increase the efficienc! of the c!cle counting proce"ure :+categor! "e&an" fre9uenc! ite&s can #e assigne" a higher counting fre9uenc!. ABC anal"sis reports (he careful &anual control of each in"i%i"ual ite& is usuall! too cu&#erso&e. Grouping ite&s in #roa" groups allows for effecti%e an" efficient collecti%e anal!sis. (he o%erall control of the in%est&ent in in%entories the a%erage ser%ice le%els can easil! #e %isualise" #! su&&ar! reports o%er the :<C categories. (he :<C categories can #e use" &anaging the pro#le& siDe. Since the : group "o&inates the other categories for the gi%en :<C criterion focusing attention on onl! ite&s of this group will re"uce effort while retaining accurac! in representing the pro#le&. The A and D categories of the sales turnover value highlight two extremes, the most profitable, and the least profitable non-moving items, while both groups usually only contain a relatively small number of the total number of items.

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Co&#ination of the :<C anal!sis for two or &ore criteria can pro%i"e e%en &ore effecti%e grouping. <! presentation of &ultiple aspects in &atri8 for& %er! clear %iews can #e o#taine". $n+entor" control or*er polic" <! selecti%el! appl!ing in%entor! policies to the "ifferent :<C categories in%entor! goals can #e achie%e" with lower in%entor! le%els or higher ser%ice le%els than with a single polic! applie" to all pro"uct classes. The A category for of customer order frequency in combination with the C category for safety stoc value highlights the opportunity where for a relatively small investment of additional money in safety stoc may lead to a high service level of the group !A, C". (he setup function I);015/ allows to assign weighting factors to influence the safet! stoc$ in the %arious :<C categories. ;A; customers & ;A; *eman* : co&#ination of the : categor! custo&ers with the : categor! of the ite& issues focuses on who are the &ost i&portant custo&ers an" what was their &ost i&portant "e&an". %uer" on ABC (he :<C anal!sis on or"er fre9uenc! an" a&ount on C;S(OM36S I(3MS an" S;PPLI36S can #e use" to select #! 9uer! the particular categor! one is intereste" in. e.g. fast &o%ers or non+&o%ing ite&s or ite&s with a high turno%er

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$N%11 & ABC ANAL=S$S

1 ! 2

6 F9NCT$ON A$1 (his function calculates an" "ispla!s the results of the :<C anal!sis o%er a range of su#'ects an" for user "efina#le cu&ulati%e threshol"s. 2or e%er! categor! the E of the total nu&#er of ite&s o%er which the anal!sis is run is shown together with the actual nu&#er an" a&ount in the categor!. STEPS =1> Choose the su#'ect e.g. ite& classes an" a particular ite& class $TE1S8 $TE1 CLASSES8 STO5ES8 C9STO1E5S or S9PPL$E5S =,> One &a! change the cumulati+e threshol*s =-> Start the anal!sis #! &ouse clic$ing the start #utton =.> One &a! focus on the : < area #! choosing the first /0 E or ,/ E an" restart the anal!sis

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NETBO5< FLOB AN A5EAS

: general flow "iagra& is "epicte" #elow.

Generate Or"ers 38ceptional ?e&an" Custo&er ?e&an" 6eturns <ac$+ or"ers Purchase Or"er

)or&al ?e&an"

S(O63 !

M:);2:C(;636

Generate an" 3nter (ransfers

S;PPLI36

Inspection an" "istri#ution ?irect Outs In this flow "iagra& - "ifferent areas can #e "istinguishe"C

3nter an" inspection receipts

(ransport

C1D CONS91PT$ON C2D T5ANSFE58 $ST5$B9T$ON NETBO5< C!D O5 E5$NE (he progra&s focus on the "ifferent areas I)*01 + Suppl! :<C an" or"er ti&e statistics + catalogue an" supplier I)*0, + Single "e&an" statistics + a%erage 9uantit!5issue an" #rea$ 9uantit! I)*0- + Consu&ption :<C statistics + on ite& stoc$ I)*0. + Client sales :<C statistics + on client co&pan! I)*0/ + 0ierarchical consoli"ation + "eter&ining the %arious cost an" ti&es aspects I)*01 + 2orecasting + forecast for all stoc$ing points I)*07 + 3O456OP5(6:)S236 para&eters I)*07 + 2OC 2i8e" or"er c!cle (he spare part cost ris$ anal!sis is so&ewhat "ifferent since it focus on @ha%ing@ rather then @re+ or"ering@. Where 6OP an" 2OC para&eters are calculate" #! "e&an" forecast #ase" on historical consu&ption relia#le historical consu&ption "ata of capital spare parts is nor&all! not a%aila#le.

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$N%12 & NETBO5< FLOB E3ENT S911A5=

1 2

6 ! F9NCT$ON A$1 (he function "ispla!s the historical networ$ &aterial flows or e%ents #! su#'ect such as custo&er consu&ption transfer an" or"er a&ounts sa&ple" in ti&e perio"s. e.g. (he screen a#o%e "ispla!s the In5Out #alance for the @MS@ store sa&ple" #! &onth. In G recei%e" purchase or"ers =re"> Out G transfers to the satellite stores =#lue> an" issues to the custo&ers =!ellow>. )O(3C If the @re"@ H @#lue@ I @!ellow@ the stores stoc$ %alue will go up. =1> One &a! choose the su#'ect li$e all ite&s an! ite& class an! store or a particular custo&er "i%ision organiDation or co&pan! Start #! choosing the t!pe to #e "ispla!e"C =,> $ssues8 $n?Out Balance8 irect&Outs8 5eturns8 Stoc)&outs8 Purchase Or*ers8 Transfers $n8 Stoc) A*Fustments8 Transfers Out

=-> (he ti&e perio" sa&pling can #e change" #! the userC b" month8 b" -uarter or b" "ear. =.> (he scroll #ar can #e use" to "ispla! &ore histor!.

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E7CEPT$ONAL %9ANT$T= T45ES4OL LE3EL

:lthough the store is &en" to ser%e &aterial re9uests non+recurrent re9uests for e8ceptional large 9uantities can "istur# the ser%icing of nor&al re9uests an" can #e &ore econo&icall! han"le" #! "irect or"ering instea" of ser%icing fro& the store. Correct han"ling of these non+recurrent or infre9uent e8ceptional re9uests is %er! i&portant. (he penalties in costs an" ser%ice le%el can #e %er! high if these e8ceptional large "e&an"s are not correctl! i"entifie" an" han"le". Ser%ing a "e&an" for an e8ceptionall! large 9uantit! fro& stoc$ will generall! lea" to stoc$+outs an" #ac$or"ers for the nor&al re9ueste" 9uantities.

Characteristics of the e8ceptional large "e&an"s areC A A A A A 38ceptional large as co&pare" with the &ore nor&al re9ueste" 9uantities )on recurrent or in+fre9uent 0istorical there are 'ust a few or there &a! #e none at all for a particular ite& ?istinct fro& the larger part of the "istri#ution :lthough the nu&#er of e8ceptional re9uests is e8tre&el! s&all co&pare" to the nu&#er of nor&al re9uests =J 1 E> the 9uantities of these e8ceptional re9uests &a! #e consi"era#le =H /0 E of the nor&al !earl! consu&ption>.

6e9uests for e8ceptional large 9uantities can #e rea"il! "istinguishe" #! their e8ceptional statistical #eha%iorC the! are separate fro& the #ul$ of the "istri#ution where the #ul$ of the "istri#ution will usuall! #e foun" within the &ean : plus a nu&#er of stan"ar" "e%iations ?.

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(o i"entif! e8ceptional large 9uantities the criterion is use" E,ceptional lar.e -uantit" G E,ception Threshol* or Brea) %uantit" > A H N ,

Where : G :%erage nor&al re9ueste" 9uantit! for a single re9uest. ? G Stan"ar" "e%iation. ) G 2actor So&eti&es ? is %er! s&all or Dero =if for a large nu&#er of "e&an"s alwa!s the sa&e 9uantit! is re9ueste"> lea"ing to a &ore logical "efinition 3 H : I ) 8 greatest =: ?>. : factor ) in the range of - to 10 will generall! separate the e8ceptional e%ents fro& the nor&al onesC If the re9uests for &aterial woul" follow a nor&al "istri#ution the possi#ilit! of a re9uest of 4t! H : I . 8 ? will #e less then 0.0,E (he penalties for not i"entif!ing the e8ceptional "e&an"s are %er! high A A Ser%icing of the e8ceptional "e&an"s will generall! lea" to stoc$+out an" #ac$or"er creation an" therefore to a low ser%ice le%el. Inclu"ing into the calculation will lea" to %er! high =incorrect> %alue for securit! stoc$ an" high %alues for the stoc$ reser%e an" econo&ical or"er 9uantit!.

38ceptional large re9uests shoul" un"ergo a special treat&ent A A I"entif! if there woul" #e enough stoc$ left after ser%icing =at least one or"er point OP> if notC create a special or"er or ?irect+Out an" possi#le ser%e a part of the re9uest =a nor&al 9uantit!> fro& the stoc$ an" the #alance later on arri%al of the special or"er. 38clu"e the& fro& the statistical calculations

Special care has to #e un"erta$en e8clu"ing the e8ceptional large 9uantities in the calculationC (he a%erage an" "e%iation use" in the e8pression a#o%e are o#taine" #! an iterati%e proce"ure first calculating the a%erage an" "e%iation fro& historical re9uests an" recalculating of the a%erage an" "e%iation e8clu"ing the e8ceptional fro& the calculation. 3cono&ical constraints can #e i&pose" #! shifting the ) to a s&aller %alue if the %alue correspon"ing to 3 is %er! large. (his constraint will lea" to 9uic$er or"ering #! "irect out of e8pensi%e ite& "e&an"s. (o a%oi" a %er! s&all %alue of ) a &ini&u& can #e "efine". . Page 1.

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3cono&ical constraints can #e i&pose" #! shifting the ) to a larger %alue if the %alue correspon"ing to 3 is %er! s&all. (his constraint will lea" to nearl! alwa!s ser%ing fro& stoc$ of cheap ite& "e&an"s. (o a%oi" a %er! large %alue of ) a &a8i&u& can #e "efine".

If there is sufficient 9uantit! in stoc$ the e8ceptional large "e&an" &a! #e ser%e" fro& stoc$. (his is the case if after ser%ing at least one reor"er point I a%erage "ail! consu&ption is left.
Stock Dynam ic Exceptio n Le vel Ex ception Leve l R O P Stock Q ty

In or"er to a%oi" chec$ing this con"ition a so+calle" stoc$ "!na&ical e8ception threshol" le%el can #e calculate" such that after ser%ing at least =Stoc$ ?!na&ic 2actor> 8 =the reor"er point I "ail! consu&ption> will #e left in stoc$ for nor&al ser%ing an" reor"ering. (his stoc$ "!na&ic e8ception threshol" le%el is "epen"ent on the situation of the stoc$ therefore it shoul" #e regularl! recalculate". (he following constraints are applie" to the e8ception threshol" le%el A )ot less then the supplier &ini&u& A )ot &ore then &a8i&u& stoc$a#le

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FO5ECAST$NE FO5 STOC< PA5A1ETE5S AN CONT5ACTS

2orecasting is ai&e" to pre"ict the future consu&ption #ase" on the historical consu&ption. Pre"iction of future consu&ption is i&portant for two purposesC I Forecast of stoc)e* item consumption (his 9uantit! is necessar! as input for the calculation of the opti&al stoc$ replenish&ent para&eters. Care nee"s to #e ta$en to filter out fro& the historical "e&an"s the so+calle" e8ceptional =large non+ recurrent> "e&an"s which will nor&all! not #e ser%e" fro& stoc$ #ut #! special or"ers or so+calle" "irect+outs. I Forecast of material suppl" nee*s for contracts (o gi%e a reasona#le esti&ate of the e8pecte" &aterial nee"s for price 9uotations an" contracts. (his 9uantit! inclu"es the statistical co&ponent for stoc$ replenish&ent as well as an e8pecte" e8ceptional "e&an" co&ponent an" a nu&#er of other co&ponents e.g. current 9uantit! on stoc$ allocate" future "e&an". 2orecasting can #e run A <! user "efine" fi8e" &etho" for each ite&. A <! auto&atic selection of the &etho" &ost successfull! pre"icting the recent $nown histor!. (he auto&atic selection is #ase" on the principle that whate%er woul" ha%e wor$e" #est in the recent past shoul" #e use" to pre"ict the future. : large nu&#er of "ifferent forecasting strategies is use" to forecast the &ost recent historical perio"s of "e&an". 3ach for&ula is &easure" accor"ing to %ariance fro& what actuall! happene" an" the for&ula which pro"uce" the &ost accurate forecast of the recent past is assigne" to the ite& an" use" to calculate the forecast an" "e%iation of the future. <! "!na&icall! choosing the &etho" gi%ing the #est fit to the historical consu&ption one ensures that the forecast will auto&aticall! a"'ust to su""en changes of the consu&ption pattern #! selecting the #est fitting &etho" to acco&&o"ate these changes. (he &aterial suppl! nee"s for a future perio" inclu"es a nu&#er of ter&s A 38pecte" nor&al "e&an" 421 A 38pecte" e8ceptional "e&an"s =if there is sufficient on stoc$ the "e&an" is satisfie" fro& stoc$ rather then #! ?irect+Out> co&ponent 42, A Bnown future "e&an" =e.g. custo&er or"ers with a future "ata> often large an" relate" to pro'ects in the for&ulaC :L=allocations> A Pro#a#le future "e&an" not #ase" on statistics speculati%e co&ponent SP A :t least an re+or"er point 9uantit! 6OP &ust #e $ept this inclu"es a safet! ter& SS an" an e8pecte" consu&ption ter& S6

(he su& of this &aterial nee" &ust #e #alance" #! A (he current 9uantit! of &aterial that is alrea"! on stoc$ su&&e" o%er all stores =inclu"ing satellite stores>C O0 A (he 9uantit! that is alrea"! on or"erC OO

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If the total 9uantit! thus o#taine"C =421I42,I:LISPISSIS6> + =O0 I OO> is positi%e there is a &aterial suppl! nee". (his suppl! nee" &ust #e e8presse" in whole or"ers where an or"er is ta$en as the greatest of the econo&ical or"er 9uantit! 3O4 an" the supplier &ini&u& an" the result is e8presse" in supplier &ultiple con"ition. see report + &aterial re9uests pro'ecte" #! supplier

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PLANN$NE
2orecasting pre"icts the future consu&ption #ase" on the historical consu&ption. Pre"iction of future on a statistical #asis can howe%er #e o+errule* if one has non+statistical $nowle"ge of the future e.g. there is a non+statistical e8pecte" growth $nown to #e happening as conse9uence of ac9uisitions or a newl! "e%eloping consu&er &ar$et.

(he planne" 9uantit! or $nown future nee" which has to #e use" instea" of the statistical forecast can #e entere" in the functions I);0. 5- + Stoc$ &anager I);1, + 38ceptions &anager (o restrict the %ali"it! of the planne" 9uantit! an en"+of+plan "ate or e8piration "ate can #e "efine". (his "ate =if "efine"> will when e8pire" erase the planne" 9uantit! an" its own %alue setting the planning an" "ate un"efine". When the planning is un"efine" the statistical forecast is use" again. ;p"ate of large groups of stoc$ positions with "ata fro& an 3*(36):L PL:))I)G s!ste& is possi#le #! special :PI interface containing the ele&ents Store co"e Ite& co"e )or&al plan 9uantit! 3n" of+nor&al plan "ate ?irect+out plan 9uantit! 3n" of ?irect+out plan "ate (his interface allows at an! ti&e for an! ite&s group or particular store to "efine planne* nor&al "e&an" an" planne* non+stoc$ "e&an" or "irect out for an! %ali" ti&e win"ow for which the planning is foreseen. (he logistic para&eters will #e calculate" using the planne* "e&an" 9uantities in con'unction with $nown historical "e&an" characteristics li$e a%erage "e&an"e" 9uantit! patterns.

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19LT$&STO5E 3E5S9S P5$NC$PAL STO5ES CONF$E95AT$ON

If there are "ifferent stores se%eral replenish&ent configurations are possi#leC Sin.le stores confi.uration. 3ach store acts as replenish&ent center an" or"ers in"epen"entl! fro& the others stores. If no principle store is "efine" on the ite& le%el the para&eters are $ept on the stoc$ recor" for each store separatel!.

1ultiple stores confi.uration (wo or &ore stores possi#l! on the sa&e site #ut not too far apart can #e 'oine" in one &ultiple stores configuration. (his can #e "one #! assigning a principal store on the ite& le%el. O#'ecti%es to "o this areC A &ini&iDe in%entor! le%els an" therefore in%est&ents A &ini&iDe stoc$+outs A &ini&iDe re+or"er costs A &ini&iDe s!ste& re9uire&ents an" costs (he &oti%es to construct a &ultiple stores installation are #ase" on the assu&ption that the stores ha%e a significant nu&#er of stoc$ ite&s in co&&on so that the safet! stoc$ the total a%erage stoc$ le%els an" the nu&#er of purchase or"ers can #e "ecrease" an" the or"er 9uantities per purchase or"er increase". In or"er for a &ultiple stores configuration to function correctl! regularl! a re+assess&ent of the in%entor! le%els per store has to #e "one resulting in a relocation of ite&s to achie%e an opti&al "istri#ution o%er the stores.

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<! assigning a principal store on the ite& le%el in function I);0- one assigns this store to act as a &aster store "ictating the replenish&ent for the total site whereas the other stores coul" #e consi"ere" as Ksla%esK for the ite&. 0owe%er it &ight #e "esira#le to han"le certain ite&s strictl! separate" per store. (his si&pl! can #e "one #! not assigning a principal store on the ite& le%el for these ite&s. :llowing to "efine a principal store offers the fle8i#ilit! to choose per ite& whether the in%entories shoul" #e accu&ulate" an" gi%es the user opti&al free"o& to "irect the replenish&ent for each stoc$ ite& in"epen"entl!. (he stoc$ in%entories are accu&ulate" for the principal stores ite& an" one safet! stoc$ one reor"er point an" econo&ic or"er 9uantit! etc. will #e calculate" for the principal store. )ote that the &a8i&u& stoc$ an" &ini&u& stoc$ le%el constraints shoul" #e calculate" #! su&&ations of the correspon"ing in"i%i"ual stores constraints. (he re+or"er polic! of the principle store will #e followe". Satellite Stores Satellite stores are replenishe" #! transfer fro& the &aster store. )O(3C (his configuration can not #e consi"ere" as a &ultiple stores configuration since the transfer is general in one+wa!. If the inter+stores transfer is not two+wa! a large 9uantit! hel" in a satellite store woul" on &ulti+stores cu&ulating #loc$ re+or"ering at the &ain store.

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3A5$O9S COSTS
(hree general classes of costs are i&portant to in%entor! &anage&ent. Or"er or procure&ent costs hol"ing or carr!ing costs an" stoc$+out or a#sence costs. (hese costs are in conflict or tra"e+off with each other. (he opti&al or"er 9uantit! is calculate" as a #alance of these costs. (he choice of in%entor! polic! can #e #ase" on the %arious costs. Cost of hol*in. (his cost represents the cost of stoc$ing an" $eeping ite&s. It is nor&all! calculate" as a percentage of the ite& a%erage unit cost of per !ear where the sa&e percentage is ta$en for all ite&s in the warehouse. 0a%ing an in%entor! can cost #etween ,0 an" .0 percent of the stoc$ %alue per !ear. (he cost relate" to $eeping the warehouse an" &aterials can #e "i%i"e" intoC 2i8e" costsC Storage costsC 0an"ling costsC these costs "o not change with the le%el of acti%it! on the facilit!. 6ent super%ision an" "epreciation of the warehouse these costs %ar! with the a&ount of stoc$ store" in the warehouse. It increases or "ecreases with the le%el of in%entor! &aintaine". It inclu"es capital tie" up in in%entor! these costs %ar! with the warehouse throughput costs to store an" pic$ ite&s.

Cost of or*er Cost of or"er or procure&ent costs. (hese costs are relate" to processing the or"er an" or"ering an ite& #! or"er+line. (he cost inclu"es cost of re%iewing the proposal creating appro%ing printing an" sen"ing the or"er+line in%oice &atching transport cost recei%ing inspecting an" entering cost. Costs associate" with ac9uisition of goo"s for replenish&ent of in%entories highl! influence the reor"er 9uantities. When the or"er 9uantit! is "ecrease" the total stoc$ %alue will #e "ecrease" with a =hi""en> higher cost resulting fro& a higher fre9uenc! of or"ering. (he cost relate" to the cost of or"ering can #e "i%i"e" intoC 2i8e" costsC Varia#le costsC Cost of processing the or"er through accounting an" in%oicing Materials+han"ling costs chec$ing an" inspection transport insurance it &a! inclu"e &anufacturing costs of the pro"uct for %arious or"er siDes

Cost of absence Cost of a#sence or out+of+stoc$ costs are incurre" when a custo&er or"er is place" #ut cannot #e issue" fro& in%entor!. (here are se%eral $in"s of stoc$+out costs "epen"ing on the role of the ite& as consu&a#le or spare part. Lost sales costsC <ac$+or"er costsC Occurs when the custo&er face" with a stoc$+out situation chooses to with"raw the &aterial re9uest. Occurs when a custo&er will wait for his or"er to #e ser%e" so that sales is not lost #ut "ela!e". If there is insufficient stoc$ to satisf! the whole re9uest the custo&er or"er can #e split #! ser%ing the stoc$ 9uantit! a%aila#le an" ser%ing the #alance later. <ac$ or"ers will create a""itional costs for or"er processing an" han"ling. Occurs as costs of lost pro"uction when the ite& is not a%aila#le as spare part when nee"e" to repair e9uip&ent in pro"uction. Occurs when a planne" ite& can not #e issue" the costs of changing the wor$+plan an" resche"uling the operations can #e consi"era#le.

Pro"uction stop costC Off+sche"ule costsC

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4$E5A5C4=
: nu&#er of para&eters are nee"e" in the logistical calculations such as ser%ice le%el hol"ing cost fi8e" an" %aria#le or"er costs a#sence cost an" re%iew5entr! ti&e. (he %alues of these control para&eters can #e specifie" on a nu&#er of le%els. (he le%els "efine a hierarch! which is followe" when the %alue of a para&eter is use" in a calculation. (he "efinition hierarchies for the "ifferent para&etersC 2i8e" Or"er or :"&inistrati%e Cost Varia#le Or"er Cost or Line Cost 0ol"ing Cost Ser%ice Le%el 6e%iew53ntr! ti&e :#sence Cost Stoc$+out Cost (ransfer channels 2i8e" (ransfer Cost (ransfer Line Cost (ransfer (i&e Ite& + Ite& + Group + Group + Channel + Channel + ?efault ?efault ?efault Ite& Ite& Ite& Ite& Ite& Ite& + + + + + Group Group Group Group Group ?efault + + + + + ?efault ?efault ?efault ?efault ?efault

(he hierarch! allows si&ple "ata "efinition anal!sis an" &aintenance. If for a particular store the fi8e" costs are "ifferent onl! "efine the para&eter for this store. If the hol"ing cost is higher for certain ite&s e.g. #ecause the! nee" a special "ust free coole" location 'ust "efine an" lin$ a para&eter group for these ite&s. If the hol"ing cost is higher for all ite&s of a particular classC then "o not "efine the %alues for all these ite&s #ut 'ust assign a para&eter group to these ite&s. (he "efinition of the %aria#le or"er cost allows a"'ust&ent of the econo&ic or"er 9uantit! 3O4 to reflect the changes in &ost econo&ical or"ering con"itions. 3.g. when or"ering fro& a near#! supplier ha%ing low transport costs the %aria#le or"er cost will #e low resulting in s&all 3O4 9uantities with a high or"er fre9uenc!. Change to a supplier locate" far awa! an" the high %aria#le or"er =transport> cost will auto&aticall! lea" to a large 3O4 there#! lowering the o%erall costs #! lowering the or"er fre9uenc!.

S U P P L I E R

S T O R E

S U P P L I E R
O p D 1 1

S U P P L I E R

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O5 E5 POL$C$ES
(he in%entor! le%els can #e controlle" #! "ifferent control policies or or"er policies. Which in%entor! control polic! shoul" #e chosen "epen"s on the ite& characteristics its use the consu&ption price a%aila#ilit! at the supplier transport costs an" %arious other aspects. (he following in%entor! control or or"er policies are supporte"C 6OP 6eor"er Point &etho". (his reor"er polic! ai&s at econo&ical stoc$hol"ing #! 'ust in ti&e at the reor"er point triggering the or"ering of an econo&ical or"er 9uantit! which is e8pecte" to arri%e #efore the reor"er point 9uantit! is consu&e". 6eor"er Point &etho" %ariation consists of the nor&al reor"er point &etho" in co&#ination with or"erline consoli"ation. 2OC 2i8e" Or"er C!cle. (his reor"er polic! ai&s at econo&ical reor"ering #! or"ering all ite&s supplie" #! the sa&e supplier together at regular re%iew ti&es or c!cle perio"s. (he lower cost of transport will generall! outweigh higher in%entor! cost cause" #! re+or"ering the ite& at relati%el! high in%entor! le%els.

M:* MI)+M:* &etho". When 9uantit! on stoc$ "rops #elow the &ini&u& le%el the reor"er 9uantit! will refill the stoc$ to a pre+"efine" &a8i&u& le%el. (his &etho" is fre9uentl! use" to refill the shel%es in retail stores an" su#+stores or satellite stores. MI)+M:* &etho" %ariation for spare parts. (his %ariation is so&eti&es use" to &anage spare parts or other slow &o%ing ite&s. So&e in%entor! &anagers consi"er for these slow &o%ing ite&s one shoul" replace stoc$ onl! as it is use" on a Kone for oneK #asis where the &a8i&u& le%el is set to a safet! le%el plus 1 =or plus the usual set siDe 5 statistical nor&al "e&an"e" 9uantit!>. On issue of an ite& an or"er is place" to replace the issue" ite&. )O) 3?I )O) stoc$ polic!. Ite&s assigne" to this polic! are not $ept in stoc$ #ut custo&er or"ers are alwa!s ser%e" #! "irect out or"ers. 3lectronic ?ata Interchange is so&eti&es inclu"e" as or"ering &etho". It in%ol%es or"ering electronicall! with the &ain a"%antage that it is a 9uic$ wa! of or"ering where#! con%entional &ail paperwor$ an" hu&an errors are a%oi"e".

Statistical calculations nee" to #e perfor&e" to support the 6OP an" 2OC an" CSP. (he other policies "epen" on user "efinition of the &ini&u& le%el lot 9uantit! an" &a8i&u& stoc$.

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5EO5 E5 PO$NT 1ET4O 5OP

(he reor"er point &etho" is an econo&ical %er! si&ple &etho" to reor"er ite&s. It focuses on the reor"ering of each ite& in"i%i"uall! #! reor"ering a =constraint> econo&ical or"er 9uantit! whene%er the 9uantit! in stoc$ #eco&es e9ual or "rops #elow the reor"er point. T4E 5EO5 E5 PO$NT (his or"er point =6OP> is a stoc$ 9uantit! that represents a &o&ent in ti&e at which a reor"er proposition shoul" #e create". It is calculate" in such wa! that when the &aterial is or"ere" there shoul" #e enough stoc$ "uring "eli%er! lea" ti&e to co%er the @nor&al@ "e&an"s for &aterial to a certain pre+ "efine" "esire" ser%ice le%el #efore the or"ere" replenish&ent is recei%e". In this wa! it "eter&ines the opti&u& &o&ent in ti&e so as to ensure ser%ice of @nor&al@ "e&an"s in the e8pecte" lea" ti&e for "eli%er!.

Q t y o n S t o c k

O r d e r P o i n t O P

O r d e rR e c e i p t

e c e i p t O r d e r R

O r d e rR e c e i p t

(he or"er point is calculate" using the following infor&ation A ?esire" ser%ice le%el A Lea" ti&e statistics or user "efine" "eli%er! ti&e an" re%iew ti&e A ?istri#ution of e8pecte" @nor&al@ "e&an"e" 9uantit!5issue for &aterial "uring "eli%er! lea" ti&e A 2luctuations in forecast lea" ti&e an" @nor&al@ "e&an"e" 9uantit!5issue

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(he or"er point OP is split in the co&ponents stoc$ reser%e =S6> an" stoc$ securit! =SS> OP > S5 H SS Where A Stoc) 5eser+e S5 is a 9uantit! to co%er the e8pecte" "e&an" in the e8pecte" lea" ti&e A Stoc) Securit" or Safet" Stoc) SS is a 9uantit! a""e" to S6 to co%er the fluctuations in "e&an" an" fluctuations in lea" ti&e an" other sources of %ariations.

(he %alue of S6 is o#taine" straightforwar" fro& the e8pecte" "e&an" an" lea" ti&e. (he calculation of the safet! stoc$ 9uantit! to assure a certain pre"efine" "esire" ser%ice le%el re9uires a &ore co&ple8 &athe&atical treat&ent.

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ECONO1$C O5 E5 %9ANT$T= EO%

(he 9uantit! or"ere" shoul" reflect a #alance #etween the cost of possession of the stoc$e" 9uantit! of the ite& an" the cost of or"ering of the ite& with the ai& of &ini&iDing the total stoc$ &anage&ent cost.
C o s t s $

T o t a lC o s t

$
C o s to f H o l d i n g

C o s to f O r d e r i n g O r d e rQ t y

E O Q

(he opti&u& 9uantit! to #e replenishe" #ase" on the lowest total rele%ant cost when the a%aila#le 9uantit! 'ust reaches the or"er point OP is gi%en #! 2 , E,pecte* Annual eman* , Cost of Or*er EO% > S%5T C &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& D A+era.e 9nit Cost , Cost of 4ol*in. (he cost of or"er &a! inclu"e a fi8e" a"&inistrati%e co&ponent or or"er cost an" a %aria#le co&ponent or or"er+line cost "epen"ing on the transport han"ling an" inspection an" a co&ponent "epen"ing on the stoc$out costs. (he 3O4 &ini&iDing the total cost will for the sa&e turn+o%er of an ine8pensi%e ite& lea" to low fre9uenc! or"ering of large a&ounts of the ite& an" high fre9uenc! or"ering of s&all a&ounts of an e8pensi%e ite&. (he 3O4 is onl! opti&al in econo&ical #ut )O( in a logical sense an" is a"'uste" confor& a nu&#er of rules e.g. Or"er not &ore then one !ears usage to restrict o%erstoc$ when the consu&ption pattern will change or"er not &ore then e8pecte" to #e consu&e" in shelf+life or"er not &ore then the &a8i&u& stoc$a#le 9uantit! etc.

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A$1J

BEST STOC<4OL $NE

A 3ach stoc$ ite& is treate" as a separate &anage&ent tas$ A 3ANTAEES A <! single ite& &ost econo&ical A 6e"uce in%est&ents in stoc$ A ?ifferent Supplier choice possi#le A ?irect Out for 38ceptional 9uantities offer )O Pro#le& A )o special &easures =Purchase sche"uling etc.> nee"e" $SA 3ANTAEES A )o purchasing a"%antages #! s!nchroniDation ite&s for the sa&e supplier A Possi#le pro#le&s when supplier G &anufacturer with @Out of the #lue@ or"ers So&e ite&s ha%e a long &anufacturing ti&e the &anufacturing is planne" in the &anufacturing sche"ule of the supplier. (he &o&ent of reor"ering which is triggere" #! consu&ption an" is opti&al for the stoc$ $eeping &a! not #e fitting in the supplier &anufacturing sche"ule.

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CONSOL$ AT$ON OF O5 E5L$NES

(he consoli"ation process ai&s to s!nchroniDe or"ering of ite&s for the sa&e supplier an" contract an" results in or"ers with &an! or"er lines. It wor$s #! pulling other ite&s into reor"ering when one ite& is nor&all! to #e reor"ere" for a gi%en supplier an" contract. In or"er to get an ite& into reor"ering the reor"er point is artificiall! increase". : nu&#er of li&its to the increase of reor"er point can #e entere". When one ite& is nor&all! to #e reor"ere" #ecause the 9uantit! on stoc$ O0 "rops #elow the reor"er point 6OP other ite&s for the sa&e supplier an" contract can #e @pulle"@ into reor"ering increasing the reor"er point is artificiall!.

A 3ANTAEES A Less or"er cost per or"erline A Less wor$ A Lea"+ti&e is re"uce" A Less errors : nu&#er of factors to increase of reor"er point can #e "efine" each li&it ha%ing its own #enefits. : co&#ination of "ifferent factors will increase the perfor&ance of the &etho". e.g. =1> %ariation of the reor"er point within a certain %alue will onl! #un"le low costing lines. =,> %ariation of the reor"er point within a nu&#er of "a!s #efore the or"er point will nor&all! #e reache" will also #un"le high costing lines which otherwise soon will #e reor"ere". =-> Co&#ination of =1> an" =,> has the a"%antages of #oth.

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F$7E O5 E5 C=CLE 1ET4O FOC

Grouping of replenish&ent re9uests for ite&s of the sa&e supplier an" or"ering on pre"efine" "ates will result in the following a"%antagesC A A A A A less or"ers lower o%erall transportation costs #etter purchasing con"itions #etter lea" ti&es #etter control of or"ering on si"e of stoc$ control as well as the supplier+ #! agree" "ates

In or"er to fulfil the re9uire&ents a#o%e re9uests for the sa&e supplier ha%e to #e s!nchroniDe" an" or"ere" at F$7E $NTE53AL (ith a 3A5$ABLE %9ANT$T= (he fi8e" inter%al c!cle perio" or re%iew ti&e can #e "eri%e" in a nu&#er of wa!sC Base* on EO% :n econo&ic or"er perio" #ase" on the 3O4 is calculate" for e%er! ite& as consu&ption ti&e of the 3O4. (he resulting perio"s are roun"e" to 0./ + 1 + , + - + 1 + 1, &onths. In this wa! the 9uantit! e8pecte" to #e consu&e" in these roun"e" perio"s will #e an appro8i&ation of the 3O4 an" the ite&s can #e groupe" together #! supplier an" the fi8e" or"er "ates can #e s!nchroniDe".
12

6 3 3 6 12

Base* on common re+ie( time T :n opti&al co&&on re%iew ti&e can #e calculate" for 'ointl! or"ere" ite&s. (he resulting perio" is roun"e" to whole &onths. 9ser *efine* :n! user "efine" c!cle can #e assigne" to an ite&. (he %aria#le 9uantit! or &a8i&u& le%el M can #e calculate" once the 2OC c!cle perio" has #een "efine".
M

C Q

2i8e" " ate

L T

C!cle p erio" ( 2i8e" " ate

L T

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:n or"ering sche"ule can then #e constructe" for the groups of ite&s in or"er to get a s&ooth wor$loa" sprea" o%er the whole !ear.

A$1J

BEST P95C4AS$NE

A Ite& purchases are #un"le" for the sa&e supplier or"ers can #e e8pecte" on agree" "ates. A 3ANTAEES A Lower Purchasing cost "ue to lower transport costs A Possi#le lower lea"+ti&es an" lower purchasing prices A <etter for SupplierC Or"ers for &anufacture" ite&s on agree" "ates $SA 3ANTAEES A 0igher stoc$ le%els A )o 2ree Supplier choice A Special &easures =Purchase sche"uling Contacts etc.> nee"e" A ;ne8pecte" stoc$+outs =<ac$ Or"ers> an" ?irect Out Or"ers for 38ceptional 9uantities will nee" special or"ers. A Change of strateg! start+up an" intro"uction nee" recalculations.

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5OP 3E5S9S FOC POL$C=

5OP& polic" (he reor"er point &etho" is an econo&ical %er! si&ple &etho" to reor"er ite&s. It focuses on the reor"ering of each ite& in"i%i"uall! #! re+or"ering constraint =supplier con"itions &a8i&u& stoc$ shelflife user "efine" lot 9t! etc.> econo&ical or"er 9uantit! O4 whene%er the 9uantit! in stoc$ #eco&es e9ual or "rops #elow the reor"er point. (his re+or"er point 6OP is a stoc$ 9uantit! that represents a &o&ent in ti&e at which a reor"er proposition shoul" #e create". It is calculate" in such wa! that when the &aterial is or"ere" there shoul" #e enough stoc$ "uring "eli%er! lea" ti&e L( to co%er the @nor&al@ "e&an"s for &aterial to a certain pre+"efine" "esire" ser%ice le%el #efore the or"ere" replenish&ent is recei%e". In this wa! it "eter&ines the opti&u& &o&ent in ti&e so as to ensure ser%ice of @nor&al@ "e&an"s in the e8pecte" lea" ti&e for "eli%er!.

OQ

ROP

Safety term SS over lead time LT

LT LT LT

(he SS ter& is a "o&inant ter& in the a%erage e8pecte" stoc$ %alue. (he SS is a "irect function of the lea" ti&e an" the "esire" ser%ice le%el. SS is co&parati%el! s&all if the lea" ti&e is short. E,pecte* a+era.e stoc) +alue 5OP Stoc$ Value G 0./ 8 Su& O4 I Su& SS= Ser%ice Le%el L lea" ti&e > 5OP Or*er line consoli*ation Ma! easil! o%erco&e the fact that nor&al 6OP + polic! "oes not #un"le or"er+lines for the sa&e supplier. 2or a supplier of 100 ite&s it lea"s to regular or"ers of ,0 to /0 lines per or"er.

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(he 2OC+polic! ai&s at or"ering at fi8e" "ates ha%ing regular inter%als or c!cle perio"s ( #etween these "ates. (he fi8e" "ates allow grouping of or"er lines for the sa&e supplier together with the purpose that the lower cost of transport will outweigh the higher in%entor! cost cause" #! re+or"ering the ite& at relati%el! high in%entor! le%els. Where the 6OP+polic! the 6OP ai&s at onl! to ser%e the "e&an" in the lea" ti&e with a pre"efine" ser%ice le%el the 2OC+polic! 9uantit! &ust ser%e "e&an" in the whole 2OC inter%al or c!cle perio" ( with a pre"efine" ser%ice le%el.
M

CQ

SS

Safety term over review time or cycle period T

(o &eet a ser%ice le%el a safet! ter& SS &ust #e a""e" for the whole c!cle perio" (. E,pecte* a+era.e stoc) +alue FOC Stoc$ Value G 0./ 8 Su& C4 I Su& SS= Ser%ice Le%el L C!cle perio" > Where the stoc$+out pro#a#ilit! of a single line in 2OC re+or"ering &a! #e s&all pro#a#ilit! on ha%ing a stoc$+out of an! of the ite&s of an ense&#le is rapi"l! increasing with the seiDe of the ense&#le. It can #e seen that replenish&ent of stoc$ #! 2OC polic! for large nu&#ers of lines the single lines &ust ha%e %er! high in"i%i"ual pre"efine" ser%ice le%els to a%oi" stoc$+out occurring for an! of the lines.

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1$N 1A7 POL$C=

(he &in+&a8 s!ste& is a si&ple an" popular &etho" of in%entor! control. (he &a8i&u& le%el is often "eter&ine" #! constraints such as consu&ption in shelflife or "efine" #! space an" stoc$ing con"itions or the econo&ical transfer 9uantit! or otherwise "eter&ine" re+suppl! 9uantit!. When 9uantit! on stoc$ "rops #elow the &ini&u& le%el the reor"er 9uantit! will refill the stoc$ to a "efine" &a8i&u& le%el.

(his &etho" is fre9uentl! use" to refill the shel%es in retail stores super&ar$ets an" su#+stores. If there are no a""itional constraints the &a8i&u& le%el &a! #e set to the reor"er point 9uantit! plus the econo&ic or"er 9uantit!. (he or"er 9uantit! is not alwa!s the sa&e #ecause the a&ount that the 9uantit! "rops #elow the reor"er point is a""e" to the "ifference #etween the &ini&u& an" the &a8i&u& le%el =refill or transfer 9uantit!>. Since the &a8i&u& le%el is usuall! not recalculate" #ut re&ains fi8e" o%er an e8ten"e" perio" of ti&e growing "e&an" will result in higher fre9uenc! of inter+warehouse transfers an" refills. (his #eha%ior is oppose" to the 6OP &etho" where a growing "e&an" will lea" to larger econo&ical or"er 9uantities. (he low econo&ical cost of refill in ti&e an" wor$loa" of inter+warehouse transfers an" the constant a%aila#ilit! of ite&s in the pro%i"ing &ain stores often &a$es the &in+&a8 or"er polic! the preferre" &etho" to $eep in%entor! in su#+stores or satellite stores an" retail stores. : %ariation of the &in+&a8 &etho" &a! #e use" to &anage spare parts or other slow &o%ing ite&s. So&e in%entor! &anagers consi"er that for these slow &o%ing ite&s one shoul" replace stoc$ onl! as it is use" on a Kone for one K #asis where the &a8i&u& le%el is set to a safet! le%el plus the usual set siDe or statistical nor&al "e&an"e" 9uantit! of a single "e&an". On issue of an ite& an or"er is place" to replace the issue" ite&.

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SPA5E PA5TS
Spare part consu&ption can #e contri#ute" to , constituentsC A Consu&ption #! planne" pre%enti%e &aintenance. Planne" pre%enti%e &aintenance is #ase" on e9uip&ent re9uire&ents an" anal!sis of #rea$"own an" repair histor!. (he "e&an" is usuall! planne" well in a"%ance an" repair parts &a! #e or"ere" #! purchasing. Consu&ption as spare part nee"e" for repair Ite&s can #e nee"e" as spare parts for repair at #rea$"own of an e9uip&ent. When the ite& is not i&&e"iatel! a%aila#le when nee"e" for repair this &a! lea" to pro"uction stop an" high stoc$+out costs.

Spare parts pro%i"e insurance to co%er the ris$s an" costs of pro"uction stop when the pro"uction e9uip&ent #rea$s "own. It &a! not #e econo&ical to hol" su#stantial 9uantities of all possi#le spare parts in the in%entor!. (he cost of ha%ing a spare part in the in%entor! is #alance" #! the cost of not ha%ing an" the #u"get for spare part in%entor!.

W o r k d e f i n i t i o n P l a n n e d P r e v e n t i v e
P U R C H A S I N G

A n a l y s i s

S c h e d u l e F a i l u r e a n d B r e a k d o w n S T O R E

W O R K

P R O D U C T I O N

H I S T O R Y

Or*er policies. M:* &etho" to &anage spare parts. (he stoc$ is replace" as it is issue" on a Kone for one K #asis where the &a8i&u& le%el is set to a safet! le%el plus the usual set siDe 5 statistical nor&al "e&an"e" 9uantit! for one "e&an". On issue of an ite& an or"er is place" to replace the issue" 9uantit!. If not all possi#le parts can #e $ept in the in%entor! a spare part cost+ris$ effecti%eness anal!sis &a! #e run to list which ite&s if hol" in the in%entor! pro%i"e the least ris$ for the a%aila#le #u"get.

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E55O5S8 LOE$CAL ASPECTS AN 9SE5 EF$N$T$ONS

ATA $NTEE5$T= )o progra& howe%er sophisticate" can pro"uce #etter results then containe" in the 9ualit! of the input "ata. One si&ple "ata entr! error &a! co&pletel! %itiate the statistical results. : "ata error of fools filter is therefore an a#solutel! necessar! in &an! progra&sC e.g. (he hu&an e!e will recogniDe the "ata of a receipt in the !ear ,0F1 or in 17F/ as wrong howe%er a progra& will not e8clu"e these "ata if not progra&&e"M ?ata error filters are therefore an essential co&ponent in all progra&s. (he opti&al %alue of the calculate" para&eters is nor&all! o#taine" in a step #! step process where opti&al results can onl! #e o#taine" after ha%ing passe" se%eral criteria each representing a "ifferent aspectC Statistical 3cono&ical Logical an" so&eti&es ?!na&ic. Onl! #! appl!ing the "i%erse criteria in a succession of steps will lea" to a solution which is &ost opti&al in all senses. (herefore the solution will generall! consist of a function where the opti&al %alue is restricte" #! #oun"ar! con"itions. : nu&#er of e8a&ples are gi%en #elow. STAT$ST$CS :n e8ception threshol" le%el a#o%e which a re9ueste" 9uantit! will not #e ser%e" fro& stoc$ #ut as special "irect+out or"er can #e calculate" #ase" on the statistical re9ueste" 9uantities "istri#ution such that onl! a s&all well+"efine" nu&#er of the re9uests will #e ser%e" #! "irect+out or"er. (his e8ception threshol" le%el howe%er "oes not represent the &ost econo&ical or logical situation. ECONO1$CS :n econo&ical or"er 9uantit! can #e calculate" #ase" an" the %arious costs an" the statisticall! forecaste" consu&ption. (his 9uantit! is onl! an in"ication of the 9uantit! which will lea" to the lowest total cost #ut not necessar! the #est solution to a nu&#er of other criteria e.g. the econo&ic or"er 9uantit! &a! #e &uch larger then what can #e consu&e" in the shelflife an" when or"ere" lea"ing to waste #! "eteriorate" pro"ucts. LOE$C :n econo&ical or"er 9uantit! for an ite& with a li&ite" shelf+life &a! #e larger the e8pecte" consu&ption in the shelf+life thus econo&ical is not alwa!s logical. F$LTE5S CAN BE EF$NE (o e8clu"e or partiall! e8clu"e5inclu"e "ata which "istur#s the @nor&al statistics@ such as pro&otion sales one ti&e installations irregular pro'ects =NA1$C (he opti&al %alue of the e8ceptional 9uantit! &a! ta$e the actual stoc$ state into account. Since the 9uantit! in stoc$ &a! %ar! this "!na&ic e8ception threshol" will %ar! li$ewise. Calculate* PA5A1ETE5S +ersus 9SE5 *efine* :lthough the progra&s are "esigne" to #e run auto&aticall! an" calculate opti&al para&eters which control the logistics of the in%entor! &anage&ent none of the &etho"s or para&eters @ta$es the control of !our s!ste& o%er@ the para&eters 'ust pro%i"e opti&al %alues in a statistical sense. (he pro"uct responsi#le $eeps full control #! the a#ilit! to enter his or her own preferre" para&eters or preferre" forecast &etho" #! use of the screens I);0. an" I);01, if he wishes to "o so. If no user "efinitions are pro%i"e" the statistics is use".

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59NN$NE A P5OE5A1
: progra& can run auto&aticall! in #atch &o"e or #e starte" fro& the &enu. (o start a progra& fro& the &enu one first has to select the P6OG6:MS &enu.

(o start a progra& clic$ with the &ouse on the progra& icon.

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$N7'1 & S9PPL= STAT$ST$CS

(he supplier statistics an" ite&s lea" ti&es progra& calculates the statistics of the "eli%er! "ela!s the nu&#ers an" total a&ounts of or"ere" recei%e" &aterials.

38ceptional ?e&an" Generate Or"ers Purchase Or"er

S(O63 M:);2:C(;636 ! S;PPLI36

3nter an" inspection receipts 6eception ?irect Outs

(ransport

(he following statistics are calculate" #! supplier an" supplie" ite&s. (he calculation can #e weighte" to focus on recent histor!. (he calculation uses or"ers for re+stoc$ing as well as "irect out or"ers. 1. Lea" ti&e an" "e%iation for all receipts for the ti&e win"ow an" weighting sche&e an" con"itions as "efine" in I);01 51 ,. Purchase histor! an" :<C anal!sis in nu&#er an" total a&ount of or"ere" for the ti&e win"ow an" percentages as "efine" in I);01 51 6esults of calculation on the ta#les + S;PPLI36S C:(:LOG See function I);01 51 an" I);01 5,

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$N7'2 & S$NELE E1AN STAT$ST$CS

(he ite&s statistics progra& calculates general single "e&an" characteristics

38ceptional ?e&an" Custo&er ?e&an" 6eturns <ac$+ Or"ers ?irect+ Outs

S(O63

)or&al ?e&an"

(he statistics are calculate" per stoc$ position. (he calculation can #e weighte" to focus on recent histor!. (he calculation uses all custo&er or"ers for stoc$ ite&s as well as "irect out or"ers. (he progra& perfor&s , stepsC 1. :%erage e8pecte" nor&al "e&an" an" "e%iation for all custo&er or"ers for the ti&e win"ow an" weighting sche&e an" con"itions "efine" in I);0157 ,. 38ceptional 9uantit! threshol" or #rea$ 9uantit! using the con"itions "efine" in I);0157 6esults of calculation on the ite& stoc$ positions ta#le + S(OCB See function I);0. 5, )O(3C (he single "e&an" statistics presents a %er! i&portant factor in the safet! stoc$ calculation for the 6OP an" 2OC reor"er policies. Ser%ice le%els an" stoc$ %alues are "epen"ent on the accurac! of the single "e&an" statistics calculation.

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$N7'! & STOC< CONS91PT$ON STAT$ST$CS

(he ite&s statistics progra& calculates general consu&ption statistics

38ceptional ?e&an"

Custo&er ?e&an" 6eturns <ac$+ Or"ers ?irect+ Outs

)or&al ?e&an"

S(O63

Generate (ransfers Out or In to other stores

(he statistics are calculate" per stoc$ position. (he calculation uses all custo&er or"ers for stoc$ ite&s as well as "irect out or"ers an" the ti&e win"ow an" :<C percentages "efine" in I);0151 (he progra& perfor&s , stepsC 1. (he selection of nu&#er an" total a&ount of the issues returns "irect+outs transfers an" ser%e" #ac$or"ers for the ti&e win"ow an" ran$ing #! :<C anal!sis of the total turno%er nu&#er a&ount =9uantit! 8 sales price> an" gross #enefit =9uantit! 8 =sales price + cost price>> o%er all stoc$ positions. Consoli"ation o%er all stoc$ positions ="ifferent stores where ite& is hel"> to the ite&s le%el :<C anal!sis of the total turno%er nu&#er a&ount an" #enefit o%er all ite&s. ,. 2irst an" last transactions "ate total nu&#er an" 9uantit! all custo&er or"ers 6esults of calculation on the ite& stoc$ positions ta#le + S(OCB See function I);0. 5, )O(3C (he %arious :<C anal!ses o%er the ite&s an" stoc$ positions pro%i"e %er! i&portant &anage&ent infor&ation.

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$N7'6 & C9STO1E5 SALES STAT$ST$CS

(he custo&ers sales progra& calculates the general consu&ption statistics for the custo&ers organiDation units "i%isions or co&panies.

Custo&er ?e&an" 6eturns <ac$+ Or"ers ?irect+ Outs

38ceptional ?e&an"

)or&al ?e&an"

(he statistics are calculate" per custo&er. (he calculation uses all custo&er or"ers for stoc$ ite&s as well as "irect out or"ers an" the ti&e win"ow an" :<C percentages "efine" in I);0151 (he progra& perfor&s the calculation stepC (he selection of nu&#er an" total a&ount of the issues returns "irect+outs an" ser%e" #ac$or"ers for the ti&e win"ow an" ran$ing #! :<C anal!sis of the total turno%er nu&#er an" a&ount =9uantit! 8 sales price> for all custo&ers. 6esults of calculation on the custo&ers ta#le + CLI3)(S See function I);07 + Custo&ers

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$N7': & FO5ECAST$NE

(his progra& calculates the short an" long forecaste" consu&ption for all the stoc$ positions the nor&al e8pecte" consu&ption as well as the e8pecte" "irect out consu&ption. (he forecasting is for re+or"ering con"itions or"er 9uantities an" contracts an" "escri#e" in the chapter Forecastin. for stoc) parameters an* contracts (he forecasting setup forecasting for&ulas an" &etho"s are "escri#e" in the S3(;P &anual function M:;01. (he use of the forecasting in the calculations is con"itional an" can #e o%errule" #! planning as "escri#e" in the chapter Plannin. (he forecasting progra& also sets a nu&#er of stoc$ consu&ption characteristics Seasonal Pattern fla. 9p?*o(n "ear tren* fla. Lumpiness fla. 6esults of calculation on the ite& stoc$ positions ta#le + S(OCB See function I);0. 5(he forecast for each stoc$ position for nor&al an" "irect out "e&an" is "ispla!e" on function I);0. page - on the sa&e page a user "efine" planning can #e entere" with an e8piration "ate.

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$N7'/ & CONSOL$ AT$ON

(he progra& calculates %arious target an" steering para&eters o#taine" #! consoli"ation of the target para&eter hierarch! as the real costs an" targets for each stoc$ ite& position. (hese cost an" target para&eters are necessar! as input for the reor"er para&eter calculations perfor&e" #! I)*07 an" I)*07 See S3(;P &anual an" chapter 4ierarch" (he progra& also calculates a ti&e s&oothe" a%erage stoc$ 9uantit! an" $eeps a recor" of the stoc$+out perio"s for &anage&ent infor&ation. 6esults of calculation on the ta#le + S(OCB See I);0. 51 (he costs an" ti&es for the sa&e ite& in two "ifferent storesC Main store with "efault supplier =(3LI/0>

Satellite store with "efault suppl!ing &ain stores =MS>

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$N7'# & 5EO5 E5 PA5A1ETE5S

(he progra& calculates the re+or"er para&eters for the 6OP polic!. It uses the costs an" targets calculate" #! progra& I)*01 an" shown #! function I);0.51 (he results can #e affecte" #! constraints as "efine" in I);015. I);0157 an" I);0(he or"erline consoli"ation is also part of the progra&. (he results #! stoc$ position are "ispla!e" in function I);0.5.

S(O63 Generate (ransfer Or"ers 2

Generate Purchase Or"ers

Constraints on or*er -uantit" an* or*er point (he econo&ic or"er 9uantit! 3O4 as function of e8pecte" consu&ption cost price an" %arious costs such as cost of or"er cost of hol"ing an" cost of stoc$out is onl! opti&al in econo&ical sense #ut not in a logical sense an" can #e correcte" #! a nu&#er of rules 9pper limit (o restrict o%erstoc$ when the consu&ption pattern will changeC A Or"er not &ore then a &ultiplier factor 8 !ears usage (o or"er not &ore then can #e hel" in stoc$ or consu&e" in the shelf+life A Or"er not &ore then the &a8i&u& stoc$a#le 9uantit! I total open #ac$or"ers 9uantit! A Or"er not &ore then e8pecte" to #e consu&e" in shelf+life Lo(er limit (o restrict the nu&#er of or"ers per !ear an" the or"er fre9uenc! per !ear A Or"er not less then a &ultiplier factor 8 !ears usage (o restrict the nu&#er of concurrent or"ers when the lea" ti&es are long an"5or the "e&an" rates are highC A Or"er not less then a &ultiplier factor 8 the re+or"er point. (his restricts the nu&#er of or"ers that will #e si&ultaneousl! on or"er. (his constraint ta$es the lea" ti&e consu&ption into account. 2or a relati%el! long lea" ti&e an" e8pensi%e ite& the calculate" econo&ic or"er 9uantit! &a! #e &uch s&aller than the consu&ption in the lea" ti&e. A Or"er not less then &ini&u& or"er 9uantit! as "e&an"e" #! the supplier )oteC a nu&#er of these constraints &a! #e in conflict e.g. (he &ini&u& or"er 9uantit! of the supplier %ersus the &a8i&u& stoc$a#le 9uantit!. : long lea" ti&e %ersus a short shelflife.

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MultiView LOGIC

Operations Support V7.0

$N7'0 & F$7E O5 E5 C=CLE FOC

(he progra& re+calculates the %arious or"er para&eters of the 2OC polic! (he 2OC polic! ai&s to or"er all ite&s for the sa&e supplier together #! re%iewing the stoc$ positions on regular fi8e" "ates with constant perio"s of ti&e #etween the&. It uses the costs an" targets calculate" #! progra& I)*01 an" shown #! function I);0.51 (he calculation can #e affecte" #! constraints as "efine" in I);015. I);0157 an" I);0-

S(O63

! Generate Purchase Or"ers

2or &ore infor&ation see chapter Fi,e* or*er c"cle metho* FOC 2or a "iscussion of the #enefits of using the 2OC %ersus the 6OP polic! see chapter 5OP +ersus FOC polic" (he results of the calculation #! stoc$ position are "ispla!e" in function I);0.5. (he 2OC sche"uler I);11 can #e use" to initialiDe the "ifferent para&eters nee"e" #! the 2OC polic! such as 1a,imum le+el Tri..er le+el $nter+al ate (he 9uantit! or"ere" will refill the stoc$ position to this le%el :n or"er line will #e calculate" onl! if on the re%iew "ate the 9uantit! in stoc$ is #elow this &ini&u& le%el Inter%al #etween stoc$ re%iews 2OC Stoc$ positions co&&on re%iew "ate. On this "ate the stoc$ positions for the particular supplier an" contract are re%iewe" an" an or"er with lines for all the positions where the 9uantit! on stoc$ is #elow the trigger le%el is create".

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MultiView LOGIC

Operations Support V7.0

$N911 & FOC SC4E 9LE5

F9NCT$ON A$1 (he purpose of this function is to select the stoc$ ite&s for a particular supplier an" contract an" calculate the inter%al $ &a8i&u& le%el 1 an" trigger le%el T #! use of a selecte" 2OC sche&e. :fter the first re%iew "ate is "efine" the polic! can #e change" to 2OC+polic!. (he list an* .o #uttons allow to 1. 2. $f the fiel* +alue is not *efine*8 select a +ali* +alue from a list $f the fiel* +alue is *efine*8 start the step

(he clear #utton resets the FOC "efinition #ac$ to 5OP an" erases "efine" 2OC para&eters STEPS 1. 2. !. 6. :. Select S9PPL$E5 Select CONT5ACT Select SC4E1E Select first re+ie( ATE Chan.e polic" to FOC

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