Reorder Quantity

The Reorder Quantity process can be run periodically to calculate the Reorder Quantity of a Stock Item based on the previous demand of that Stock Item.  It calculates and updates Safety Stock quantity and Reorder Level for the selected inventory stock items. Three methods are available to calculate Reorder Quantity in the ABC Classification Parameters table: Manual, Order Up To and Economic Order Quantity (EOQ).

• Manual - Users have the ability to calculate the Reorder Level Reorder Quantity and manually enter that into the system.

• Order Up To - A technique for steady demand patterns or grouped (multiple warehouses) reordering when one warehouse drops below its reorder level. The order quantity is determined as the sum of the ‘order up to’ amounts for all warehouses carrying this item. Only Reorder Level will be calculated and not the Reorder Quantity.

• EOQ - This method balances Inventory carrying costs against order costs. In addition to the Reorder Level, Reorder Quantity will be calculated.

The Reorder Quantity is calculated in the following manner.

• Check the Order Quantity method

  For each selected record, the batch job checks the Order Quantity method in the ABC Classification Parameter table using the Department Code, Unit Code and the ABC Class of the record: If method is Manual, record will be excluded from processing. This record is displayed in the Reorder Quantity Exception Report with the message “Item not processed as Reorder flag is manual in the ABC Classification Parameters table.” If the method is Order Up To, Reorder Level will be calculated for the record. Reorder Quantity will not be calculated for the record. If the method is EOQ, Reorder Level and Reorder Quantity will be calculated for the record.

• Calculate Total Deviation and Mean Absolute Deviation for each record

  The batch Job calculates the Total Deviation and Mean Absolute Deviation for each of the selected record, whether the Order Quantity method is ‘Order up to’ or ‘EOQ’. Mean Absolute Deviation is used to calculate the Safety Stock for each record stock item. The Total Deviation will be calculated for the number of months’ data available in the Inventory table. This in turn is used to calculate the Mean Absolute Deviation. The number of months’ data available in the Inventory table will be calculated as follows: Retrieve the First Receipt Date of the Stock Item record from the Inventory table The calendar month and the Fiscal Year of the First Receipt Date will be considered as the first month for which data is available. The Difference between the month for which Reorder Quantity is calculated (from step 1) and the First Accounting Period (calculated above) will be considered as the number of months’ data available. When the Stock Item's First Receipt Date's Month is greater than the Reorder Month, the Reorder calculation process will write that Stock Item to the Exception report and exclude that stock item record from further processing. The message in the Report should be ‘Calculation bypassed as the ‘Number of months’ available is less than zero.’ The maximum number of months’ data available for calculating Mean Deviation will be 12 + (Reorder Month - 1) as the Forecast Demand is available only for the past 12 months.   The Total Deviation will be calculated as follows: Retrieve the number of months to be used for calculations from ABC Classification Parameter table using the Department Code, Unit Code and ABC Class for the selected record. Compare the number of months available in the Inventory table (calculated in the previous step) against the number of months specified on the ABC Classification Parameter table. If Reorder Quantity will be calculated for period 'P', the Current Year Issue month prior to that month (i.e. P -1) will be considered as the first month of the specified number of months. Months prior to the first month (P -2, P-3 etc.) will be considered as the second month, third month respectively till the specified number of months is reached. If specified number of months is not reached after all the months of 'Current Year Issue' are considered, the 'Prior Year 1 Issue' months will be considered. For example, if the Reorder Quantity is to be calculated for month of October 2002 based on the demand for previous 4 months, then September 2002 (Reorder Quantity month of October 2002 less one) is considered as the first previous month of the specified number of months. August 2002, July 2002 and June 2002 are considered as the previous months 2, 3 and 4 respectively. If the number of months available is less than specified, the number of months will be adjusted to the maximum available and the Total Deviation calculated with the adjusted number of months. This information is displayed in the Reorder Quantity Exception Report against the record “The number of months is readjusted to 'n' number of months as the number of months specified on the ABC Classification Parameter table are not available.” For example, if the Number of months specified on the ABC Parameters table is 10 and the Prior Year Issue available on the Inventory table is only for 6 months then the Total Deviation is calculated by taking into account the Prior Year issues for 6 months only. The fact that the calculations are done based on 6 and not 10 months will be displayed in the Reorder Quantity Exception Report. Monthly Deviation is calculated as the absolute difference between the issued quantity for a month less the Forecast Quantity for that month for the number of months specified on the ABC Classification Parameters table or for the adjusted number of months (if the number of months have been adjusted)The maximum number of months’ data available will be 12 + (Reorder Month – 1). Total Deviation is calculated as the sum (total) of Monthly Deviations calculated in the previous step.   The Mean Absolute Deviation will be calculated as follows: The Mean Absolute Deviation is calculated as the Total Demand divided by the number of months specified on the ABC Classification Parameters table or adjusted number of months (if the number of months have been adjusted.)

• Calculate Safety Stock

  Mean Absolute Deviation calculated in the previous step is used to calculate the Safety Stock, which in turn is used to calculate the Reorder level for each record. The Safety Stock for each record is calculated as the Safety Stock Factor on the ABC Classification Parameters table multiplied by the Mean Absolute Deviation. If the Safety Stock calculated has more than 5 decimal places, the Safety Stock will be rounded off to 5 decimal places before updating the Inventory table.

• Calculate Daily Average Usage

  The Daily Average Usage is calculated as the Forecast Demand Quantity for the Reorder month divided by 30. For example, if the Reorder Quantity is to be calculated for the month of January 2002, the Forecast Demand Quantity for the month of January 2002 retrieved from the Inventory table divided by 30 will be considered as the Daily Average Usage.

• Calculate Total Lead Time

  Total Lead Time is calculated as the sum (total) of the Required Lead time from the Inventory table, Vendor Lead time from the Inventory Table and Lead Time Adjustment from ABC Classification Parameters table.

• Calculate Reorder Level

  Based on the Safety Stock Quantity, Daily Average Usage and Total Lead Time calculated in the previous events, the batch job will calculate Reorder Level as the addition of Safety Stock Quantity to Daily Average Usage multiplied by Total Lead Time i.e. (Daily Average Usage * Total Lead Time) + Safety Stock Quantity. If the Reorder Level Calculated has more than 5 decimal places, the Reorder Level will be rounded off to five decimals places before updating the Inventory table.

• Calculate Reorder Quantity

  The process checks for the flag ‘Marked for future deletion’ on the Inventory table. If Marked for Future Deletion flag is set to false, the Reorder Quantity will be calculated as follows: (This event will be performed by the batch job only if the Order Quantity method for a record is ‘EOQ’). Calculate Annual usage as the total of Issued Quantity for the number of months specified on the ABC Classification Parameters table or adjusted number of months (if the number of months have been adjusted.) If the Number of months is zero, calculate Annual usage as zero and display in the Reorder Quantity Exception Report with the message ‘Annual usage cannot be calculated as Number of months specified on the ABC Classification Parameters table is zero.’ If EOQ percentage is zero on the ABC Classification Parameters table calculate Reorder Quantity as zero. If the Unit Cost on the Inventory table is zero, calculate Reorder Quantity as zero. Otherwise, calculate Reorder Quantity as square root of ((2 * Annual Usage * EOQ Order Cost from ABC Classification Parameters table)/(EOQ Percentage from ABC Classification Parameters table *Unit Cost from Inventory table)). If the Marked for Future Deletion flag is set to true, the Reorder Quantity is calculated as Backorder Quantity on Inventory table less On Order Quantity On inventory table less Requisitioned Amount from the Inventory table. If the Reorder Quantity calculated is less than zero, than the Reorder Level will be set to zero. If the Reorder Quantity Calculated has more than 5 decimal places, the Reorder Quantity will be rounded off to five decimals places before updating the Inventory table.

• Update the calculated Reorder Quantity and Generate Exception Report

  Reorder Level/Quantity is calculated for all records except when the First Receipt Date is blank, Order Quantity Method is ‘Manual’ on ABC Classification Parameters table or the Manual Reorder Flag is true on the Inventory table or the number of months is less than zero. If Reorder Level/Quantity is calculated for a record, than irrespective of the amount calculated or an exception associated with the record, the Inventory table will be updated. The batch job updates the Safety Stock and Reorder Level on the Inventory table with the calculated Safety Stock, and Reorder Level for each record that has the Order Quantity method as ‘ Order up to’. If the Order Quantity Method for a record is ‘ EOQ’, Reorder Quantity will also be updated on the Inventory table for that record in addition to the Safety Stock and Reorder Level.