Replenishment Calculation With Lowest Price Vendor

During replenishment calculation, it is possible for the system to consider the different prices offered by various vendors for an item and automatically select the vendor with the lowest price in the replenishment journal.

To enable this feature for an item, select the Select Lowest Price Vendor check box on the Ordering FastTab in the Retail Item Card page.

In Purchase Replenishment Journal, the quantity to be purchased will be calculated according to the demand during the coverage period. Based on this quantity, the system will find and select the vendor that fulfills the minimum quantity and offers the lowest Direct Unit Cost defined in the Purchase Prices setup. Depending on the Purchase Order Type of the Purchase Replenishment Journal, the total quantity used to select the lowest price vendor can either be grouped by item, or by item and location.

To demonstrate the differences between the grouping types, consider the below price setup and purchase quantity for an item.

Purchase Prices:

Vendor No. Minimum Quantity Direct Unit Cost
VENDOR1 20 10.00
VENDOR2 50 8.00

Purch Replen. Jrnl Details:

Location Code Quantity
S0001 30
S0002 40

Example 1: To replenish warehouse (grouped by item)

Purchase Order Type: One Purchase Order per Vendor

Based on this Purchase Order Type, the quantity will be grouped by item across all locations, thus the total quantity will be 70 and this fulfills the minimum quantity for VENDOR1 (20) and VENDOR2 (50). As VENDOR2 offers a lower price, it will be selected with the Direct Unit Cost of 8.00 to replenish the warehouse.

Example 2: To replenish stores (grouped by item and location)

Purchase Order Type: Purchase Orders for Receiving Locations

Select Lowest Cost By: Item and Location

Based on this Purchase Order Type and the Select Lowest Cost By option, the quantity will be grouped by item and location, thus each location's quantity can only fulfill the minimum quantity for VENDOR1 (20). To replenish the stores, VENDOR1 will be selected with the Direct Unit Cost of 10.00.

Note: For this purchase order type, it is possible to group the quantity by item by selecting the Item option in the Select Lowest Cost By field. This can be useful if the store locations are close to each other, where you can group the purchase quantity across these locations to get a lower price.

Selecting Lowest Price Vendor with Vendor Lead Time

When both Select Lowest Price Vendor and Enable Lead Time Calculation are enabled, the system will consider all the vendors that are assigned to the item and calculate the quantity based on each vendor lead time. Different vendor lead time will result in different quantity, therefore the system will consider each possibility and choose the vendor that offers the lowest price with the required quantity. See Lead Time Calculation for more information on how the lead time works.

Example:

Assuming that we are calculating the replenishment quantity for an item in location S0001 with the below data and setup.

Effective Inventory = 30, Daily Sales = 5, Coverage Days = 7

Item Vendor Catalog:

Vendor No. Lead Time Calculation
VENDOR1 3D
VENDOR2 1D

Purchase Prices:

Vendor No. Minimum Quantity Direct Unit Cost
VENDOR1 5 10.00
VENDOR1 15 7.00
VENDOR2 5 9.00
VENDOR2 30 6.00

Calculation Steps:

  1. The system will consider the vendors from Item Vendor Catalog and calculate the quantity to replenish based on each vendor lead time.
  2. Calculation Formula:
    Lead Time Days x Daily Sales = Lead Time Sales Quantity
    Effective Inventory - Lead Time Sales Quantity = Projected Effective Inventory
    Coverage Days x Daily Sales = Coverage Sales Quantity
    Coverage Sales Quantity - Projected Effective Inventory = Quantity

    Vendor No. Location Code Eff. Inventory Daily Sales Lead Time Days Lead Time Sales Qty. Projected Eff. Inventory Coverage Days Coverage Sales Qty. Quantity
    VENDOR1 S0001 30 5 3 3 x 5 = 15 30 - 15 = 15 7 7 x 5 = 35 35 - 15 = 20
    VENDOR2 S0001 30 5 1 1 x 5 = 5 30 - 5 = 25 7 7 x 5 = 35 35 - 25 = 10

  3. Based on the quantity to be purchased from each vendor, the lowest Direct Unit Cost that fulfills the minimum quantity in Purchase Prices will be determined.
  4. Vendor No. Location Code Quantity Direct Unit Cost
    VENDOR1 S0001 20 7.00
    VENDOR2 S0001 10 9.00

  5. As VENDOR1 offers the lowest price among the vendors, the system will create a replenishment journal line to purchase from VENDOR1 with the Quantity of 20 and the Direct Unit Cost of 7.00.

See Also

Replenishment Process

Replenishment Templates

Automatic Replenishment