Now we will look at your order point in days.
Do any of these seem off?
There are 10 variables that determine safety stock. You can view these by opening the safety stock analyzer. Here we are going to focus on service level and deviation and what they mean for your product’s safety stock.
Safety Stock Analyzer
The Safety Stock Analyzer shows you the 10 variables that are factored into safety stock.
Service Level for individual products is determined by high-level managers. Knowing the service level is important for buyers because products with higher service levels require higher fill rates. Service level is an important factor of safety stock. Products with a higher service level will require more safety stock than if they were at a lower level.
The deviation represents the range of the history from the average.
For example, a product that is stable with history only ranging from 20-30 units per period (with multiple periods of history) will have a lower deviation. This means it will need less safety stock because it is stable and easier to predict.
A product that ranges from 20-300 per period will have a very large deviation. This product will need more safety stock since it is erratic and difficult to predict.
Product behavior can certainly change over time. If you feel that the product has become more stable in recent periods, you can edit history and include the recent periods. Your daily sales is a great tool to help you determine this. You don’t always want to lower the deviation. Only when it is necessary. Those unstable erratic movers will need the higher deviation in order to calculate enough safety stock to cover for the uncertainty.
Are your lead times correct? On initial setup, you input the lead time for a supplier. After that, the system records each product lead time and calculates the appropriate lead time for each product for each order.
Inspect the Lead Time
Lead time factors in when suggested orders are created and how much inventory you carry. The longer the lead time the farther you have to plan out how much product to order.
From the Product Details screen click the ‘Lead Times’ button. Click the button and inspect the receipt of deliveries for a product. This should give you an idea if there is are some abnormal deliveries.
If you need to adjust the lead time, go to the product maintenance for the product. This can be accomplished by clicking on the Product Settings button after opening up any product. Toggle through to screen SOQ Components. Here check the lead time and adjust it if necessary. Recalculate the order and see if the new suggestion makes more sense.
Is your Order Cycle set correctly? Your order cycle determines how often the system tries to order. More frequent orders mean you will carry less inventory but have higher order costs. Less frequent orders mean you will have fewer order costs, but carry more inventory to meet your needs.
Order Cycle Analysis
To review Order Cycle Analysis, you will have to open Supplier Settings.
Click the ‘Order Cycle’ button. The system will use some default values to test and determine the most economically advantageous order cycle.
Click the ‘Calculate Best Fit Order Cycles’ button to find the optimal order cycle for the supplier.
After you find the optimal order cycle make sure you the Current Order Cycle quantity as shown below and update your order cycle. Recalculate the order and see if new suggestion makes more sense.
If you made a change, recalculate the order.
Next you can check the order costs.
Article last revised on 12/11/2018