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Business Examples On Different Replenishment Methods

Business Examples On Different Replenishment Methods Constant


This is a stock-oriented method, which the item is replenished when the inventory level falls below a specified level, or the maximum stock level. The recommended order quantity (RO ! is the difference between the maximum stock level and the net available inventory. "on-forecasted replenishment method. - #ncrement $ercent% The percent by which the min&max stock quantities will be inflated&deflated by the RO calculations (min&max levels can be ad'usted if necessary!. #t is a temporary way to chan(e min&max levels without havin( to ad'ust the base min&max levels. ()hen the increment percent is *++, no chan(e occurs.! E.g: , flat screen T- is set on constant replenishment with a maximum stock level of *++. .ach time the T- sells, one is ordered /ax 0tock 1 *++ 2urrent 0O3 1 *++ , corporate customer purchase *+ of the T-s. "ew 0O3 1 (*++ -*+! 1 4+ Replenishment (enerates an RO of *+ to brin( the stock on hand to *++.

Min/Max
This is a stock-oriented method, which the item is replenished when the inventory level falls below a specified minimum stock level. "on-forecasted replenishment method. - /inimum 0tock 5evel% The minimum stock quantity the user wishes to have on-hand. This value represents the order point in the min&max method. - /aximum 0tock level% The maximum stock quantity the user wishes to have on-hand. This value represents the order-up-to point for the min&max method. E.g% , pair of runnin( shoes is placed on min&max replenishment, with a maximum stock of 6 of each si7e and a minimum of 8 for each si7e. /ax 1 6 /in 1 8 2urrent 0O3 1 6 , pair of si7e 9 is purchased, brin(in( stock on hand to :. "ew 0O3 1 (6 ; *! 1 : Replenishment does not (enerate an RO . Over the next few days, four more si7e 9s are purchased, brin(in( the stock on hand to *. "ew 0O3 1 (: ; <! 1 * ,fter the :th pair is sold, replenishment (enerates and RO of :, because the stock fell below the minimum of 8, to brin( the stock back to 6.

Floating Point
This is a stock-oriented method, which the item is replenished when the inventory level falls below a system-calculated maximum stock level. The maximum stock level is dynamically calculated usin( historical sales data from stores or historical issues date for warehouses. The recommended order quantity is the difference between the maximum stock level and the net available inventory. "onforecasted replenishment method. - 0ervice 5evel% The measure of probability that customer demand is satisfied from on-hand inventory. E.g% 5ar(e ba(s of /=/s seem to sell in spurts, so the item is put on the floatin( point replenishment method. On the day replenishment runs, 8&*&+:, the process looks at the sales history for the same date one year a(o, 8&*&+<. The process determines how much was sold in the *8 weeks prior to 8&*&+<% 0ales history *8 weeks prior to 8&*&+< 1 8:++ The process then determines how much was sold in the *8 weeks after 8&*&+<% 0ales history *8 weeks after 8&*&+< 1 >+++ The process determines that there was an approximate *6? increase in sales between the two *8-week periods. #ncrease 1 ((>+++ ; 8:++! & >+++! 1 .*6 1 *6? The process then looks at sales history for the *8 weeks prior to 8&*&+:% 0ales history *8 weeks prior to 8&*&+: 1 *@++ Aased on the additional volume sold last year, it can be anticipated that in the next *8 weeks there will be a *6? increase in sales, which equates to an additional 8@8 ba(s. ,dditional need 1 (*@++ B .*6! 1 8@8 Replenishment sets the maximum stock at *4@8. /aximum stock 1 (*@++ C 8@8! 1 *4@8 Replenishment then determines that the current stock on hand is *968. ,n RO of **+ is (enerated to brin( the stock on hand up to the maximum. 2urrent 0O3 1 *968 "eeded 0O3 1 *4@8 RO 1 **+

Time uppl!
This is a stock-oriented method in which replenishment is based on the number of days of supply for the item you want in inventory. The item is replenished when the net available inventory falls below the quantity required for the specified minimum days of supply. The recommended order quantity is calculated usin( forecasted sales for the item, the maximum days of supply required, and the net available inventory. , forecastin( application, such as Oracle Retail Demand Eorecastin(, must be used with this replenishment method. F Time 0upply #ssues% Gsed only by warehouse. 0ame as Time 0upply (0ales! but uses warehouse issues to forecast. - Time supply hori7on% The number of days forecasts should be considered when calculatin( the daily sales rate. E.g: , brand of drain cleaner is placed on Time 0upply replenishment. The minimum number of days of supply (DO0! that must be on hand is 8, and the maximum is :.

/in DO0 1 8 /ax DO0 1 : Daily Rate of 0ale 1 *+ Aased on forecastin( information, a rate of sale of *+ per day is calculated. /in required for DO0 1 (8 B *+! 1 8+ /ax required for DO0 1 (: B *+! 1 :+ 2urrent 0O3 1 *6 Replenishment runs and determines that the stock on hand is less than the requirement to meet the minimum days of supply (8+!, and (enerates an RO for >< to order up to the requirement for meetin( the maximum days of supply, which is :+. RO 1 (:+ ; *6 ! 1 ><

D!nami"
This is a service-oriented method in which recommended order quantities are dynamically calculated. The complex calculation considers current sales, sales trends, seasonal demand patterns, service level ob'ectives, and a lost sales factor. , forecastin( application, such as Oracle Retail Demand Eorecastin(, must be used with this replenishment method. F Dynamic #ssues% Gsed only by warehouse. 0ame as Dynamic (0ales! but uses warehouse issues to forecast. - #nventory 0ellin( Days% The number of days of inventory the retailer wants to have on hand to meet forecasted demand (usually lon(er than the number of days between reviews!. 3elps to reduce the number of small orders. - 5ost 0ales Eactor% Gsed to calculate sales that could have occurred if inventory had been available throu(hout the order lead-time. E.g: $aper towel is placed on dynamic replenishment. 2urrent 0O3 1 @: ,ctual forecast 1 *:+ 0afety stock 1 *+, presentation stock 1 : Hreater of two is considered 0afety stock Eorecast C safety stock 1 *:+ C *+ 1 *6+ 5ost sales factor 1 <+? 5ost sales quantity to add 1 (* - .<! B (*:+ ; @:! 1 <: Eorecast C safety stock C lost sales quantity 1 *6+ C <: 1 8+: Einal RO 1 8+: ; @: 1 *>+ (The actual equation considers the service level, forecast and forecast confidence, safety stock vs. presentation stock, lost sales rate, and inventory sellin( period.! F Time uppl! easonal and D!nami" easonal: These methods wei(h the replenishment al(orithm RO a(ainst the forecasted demand until the end of the season. Retail /erchandisin( 0ystem (R/0! selects&recommends the lower value of the two fi(ures in order to reach the retailerIs Terminal 0tock Hoal for the 0pecified end of 0eason&$hase. The main benefit is to lower the amount of inventory that must be placed on clearance at the end of the season.

tore Orders
This method allows the pro(rams to look at the store order need quantity when determinin( the recommended order quantity. )hen an item&location is set up on with this method, R/0 looks at a the

store order records where the store quantities have need dates that fall between the delivery date of the first review cycle and the delivery date of the second review cycle. The process dates do not contain a value and the need quantities are (reater than 7ero. - Re'ect $assed Due 0tore Orders% 2ontains an indicator that determines if uploaded store orders should be re'ected. #f the indicator is J"J, then store orders for all need dates are valid. #f JKJ, store orders with needs date on or after the ".LTMD.5#-.RKMD,T. are valid. E.g: , store places an order for *+ cases of hair spray. The order is processed on 8&*:&+:, with a not after date of 8&*9&+:. Replenishment reviews the order, but determines that the lead time for the hair spray of : days will not allow the order to be received in time, and the order is re'ected. The store places a new order with a not after date of 8&88&+:. Aecause the lead time can be met, replenishment accepts the order and the *+ cases are ordered for the store. (The order can still be re'ected before bein( filled!.