Effective Inventory
The system calculates the inventory that is going to be used in the rest of the calculations.
Effective Inventory =
Inventory
+ Quantity on Purchase Order
- Quantity on Sales Order
+ Quantity in Transfer In
- Quantity in Transfer Out
Note: It is possible to set up which document types (Purchase Order, Sales Order, ...) should be considered in the calculation. This can be done in the Replen. Setup page, in the Effective Inventory FastTab.
Average Daily Sale
The Average Daily Sale is not calculated as in the method Average Usage. The value of the field Manual Estimated Daily Sales is used as the Average Daily Sale.
Stock Cover Days
For items with Stock Coverage Days Profile
If Stock Coverage Days Profile is used, the Stock Cover Days are dynamically calculated based on the next replenishment calculation day, and the parameters as defined in the Replen. Coverage Days Profile. The Warehouse Stock Cover Days and Store Stock Cover Days are calculated as follows:
Warehouse Stock Cover Days = No. of Days until Next Calculation Day + Inbound Whse. Handling Time + Coverage Buffer Days - Store Closing Days
Store Stock Cover Days = No. of Days until Next Calculation Day + Inbound Store Handling Time + Coverage Buffer Days - Store Closing Days
If the item is having Enable Lead Time Calculation activated, the Inbound Location Handling Time is added on top of the Lead Time instead, that is, the Sourcing Location Lead Time for transfer and Vendor Lead Time for purchase replenishment. This makes up the Lead Time Cover Days. The Stock Coverage Period is shifted to start a day after the stock arrives, that is, after the Lead Time Coverage Period.
For Purchase to Warehouse:
Lead Time Cover Days = Vendor Lead Time + Inbound Whse. Handling Time
For Purchase to Store:
Lead Time Cover Days = Vendor Lead Time + Inbound Store Handling Time
For Transfer to Store:
Lead Time Cover Days = Sourcing Location Lead Time + Inbound Store Handling Time
For example, a store is open from Monday to Saturday and has been set up to have 1 day of inbound location handling time and 2 coverage buffer days. The replenishment calculation is set up to be run every Monday and Wednesday. The selected vendor needs 2 days of lead time to deliver the items.
Replenishment calculation on Monday (01.06.2020) :
Lead Time = Vendor Lead Time + Inbound Store Handling Time
= 2 + 1
= 3 days
The stock will arrive 3 days later after 01.06.2020 which is on 04.06.2020.
Store Stock Coverage Period (Days) = No. of days until next calculation day + Store Coverage Buffer Days
= 2 (Tuesday until Wednesday) + 2
= 4 days
The Store Stock Coverage Period will start a day after the stock arrived and end 4 days later, which is from 05.06.2020 until 08.06.2020 (including the Store Closing Days).
Store Stock Coverage Days = Store Stock Coverage Period (Days) - Store Closing Days
= 4 – 1
= 3 days
Replenishment calculation on Wednesday (03.06.2020):
Lead Time = Vendor Lead Time + Inbound Store Handling Time
= 2 + 1
= 3 days
The stock will arrive 3 days later after 03.06.2020 which is on 06.06.2020.
Store Stock Coverage Period (Days) = No. of days until next calculation day + Store Coverage Buffer Days
= 5 (Thursday until Monday) + 2
= 7 days
The Store Stock Coverage Period will start a day after the stock arrived and end 7 days later, which is from 07.06.2020 until 13.06.2020 (including the Store Closing Days).
Store Stock Coverage Days = Store Stock Coverage Period (Days) - Store Closing Days
= 7 – 1
= 6 days
For items without Stock Coverage Days Profile
If Stock Coverage Days Profile is not used, the system will use the Wareh Stock Cover Reqd (Days) field to replenish a warehouse and will use the Store Stock Cover Reqd (Days) field to replenish a store.
Stock Cover Days = Store Stock Cover Reqd (Days)
-or-
Stock Cover Days = Wareh Stock Cover Reqd (Days)
With Enable Lead Time Calculation activated for the item, the Stock Coverage Period is shifted to start a day after the stock arrives, that is, after the Sourcing Location Lead Time for transfer and Vendor Lead Time for purchase replenishment, which makes up the Lead Time Coverage Period.
For Purchase:
Lead Time Cover Days = Vendor Lead Time
For Transfer:
Lead Time Cover Days = Sourcing Location Lead Time
Note: When replenishing a warehouse, the system tries to use the Wareh Coverage Days Profile, or the Wareh Stock Cover Reqd (Days) field, if the profile for the warehouse is not defined. If both of them are empty, the system will look for the Store Coverage Days Profile, or finally, the Store Stock Cover Reqd (Days) field, if the profile for the store is not defined.
See Also: Replen. Coverage Days Profile, Replenishment Batch Calculation Calendar, Lead Time Calculation
Suggested Quantity
The system can suggest the quantity that the warehouse or the store needs according to the following formula:
System Suggested Quantity = Average Daily Sales * Required Stock Cover Days * Forward Sales Forecast Factor - Effective Inventory
Or, when Lead Time Calculation for the item is enabled:
System Suggested Quantity = Average Daily Sales * Required Stock Cover Days * Forward Sales Forecast Factor - Projected Effective Inventory
For items having the Lead Time Calculation enabled, the System Suggested Quantity is calculated based on the Projected Effective Inventory, instead of the Effective Inventory. For more information, refer to the Projected Effective Inventory and System Suggested Quantity sections under Lead Time Calculation.
If the System Suggested Quantity is less than zero, the System Suggested Quantity is set to zero.
If the Effective Inventory is greater or equal to the System Suggested Quantity, the System Suggested Quantity is set to Zero.
Note: If there is any Planned Sales Demand within the required stock cover period, the System Suggested Quantity is adjusted to reflect the Planned Sales Demand.
Cross Docking
If the Journal is to replenish the warehouse with cross docking to the stores, it is necessary to calculate how much should be cross-docked to the stores.
The regular Journal process calculates the System Suggested Quantity according to the Warehouse Stock Cover Days as the Journal replenishes the warehouse.
This additional process calculates the Quantity to Cross Dock for the store using the Store Stock Cover Days.
For items having Lead Time Calculation enabled, the Quantity to Cross Dock is calculated based on the Projected Effective Inventory, instead of the Effective Inventory. For more information, refer to the Projected Effective Inventory section under Lead Time Calculation.
Quantity to Cross Dock = Average Daily Sales * Store Stock Cover Days - Effective Inventory
Or, when Lead Time Calculation for the item is enabled:
Quantity to Cross Dock = Average Daily Sales * Store Stock Cover Days - Projected Effective Inventory
Example:
Condition:
- The warehouse has 8 days as Stock Coverage but the store has 3. The system calculates how much the store needs for 10 days.
- Average Daily Sale = 10
- Store Stock Cover Days = 3
- Warehouse Stock Cover Days = 8
- Forward Sale Forecast Factor = 1.1
- Effective Inventory = 5
Result:
- Quantity to Cross Dock = (10 * 3) - 5 = 25
- System Suggested Quantity = (10 * 8 * 1.1) - 5 = 83
- The Quantity in the Purchase Order for the warehouse is 83 but when the Purchase Order is received into the warehouse, the staff cross-dock (pick) the 25 to be delivered by a Transfer Order to the store.
Note: If there is any Planned Sales Demand within the store stock cover period, the Quantity to Cross Dock is adjusted to reflect the Planned Sales Demand.
Planned Sales Demand
If there are Planned Sales Demand records for the required stock cover period (warehouse or store), the system sums the quantities from the Planned Sales Demand records, and the System Suggested Quantity will be adjusted to include the Planned Sales Demand quantity.
Demand Quantity = Average Daily Sale * (Required Stock Cover Days – No of Planned Sales Demand Days) + Total Planned Sales Demand Quantity
System Suggested Quantity = Demand Quantity * Forward Sales Forecast Factor - Effective Inventory
Or, when Lead Time Calculation for the item is enabled:
System Suggested Quantity = Demand Quantity * Forward Sales Forecast Factor - Projected Effective Inventory
Note: Quantity to Cross Dock will also be adjusted if there are Planned Sales Demands within the store stock cover period.
See Also