Demand management is aimed to provide the enterprise with complete and timely stock supplies at minimum costs. Our inventory management model helps you quickly define and control required size of warehouse inventory.
It solves the following tasks:
- Provision of stock availability at the warehouse in the required amount
- Achievement of the desired level of customer services
- Uninterrupted production activity
- Reduction of demand in floating assets
- Excluding shortage of material resources
- Improvement of goods turnover indicators
- Reduction of enterprise costs for goods purchase and storage
- Surplus inventory elimination
When making demand fulfillment decisions, you can use not only data on actual warehouse balance, but also data on expected receipts and shipments (planned balance).
There are two options of demand fulfillment and order generation in the application in accordance with the calculated demands. To choose an option, click Master data and settings – Master data and sections – Warehouse and delivery – Demand fulfillment:
- Simplified – all demands are fulfilled by purchase orders. The demands are calculated based on data of shipment orders and maximum balance.
- Advanced – demand fulfillment options and diagrams are provided to describe the full goods movement life cycle. Demands are fulfilled according to the selected fulfillment option: purchase orders as well as transfer, assembly/disassembly, production orders and tolling orders are generated. The demands are calculated in accordance with specified fulfillment option—order against order, inventory level control (min–max, consumption rate and statistics)—considering scheduled delivery time and time between deliveries. This option allows you to accept orders considering fulfillment features (set the shipment date in the sales order).
Both options are used to maintain and control warehouse balance and fulfill shipment orders.
With simplified demand fulfillment option, you can do the following:
- Maintain warehouse balance (minimum and maximum balance).
- Analyze expected order receipt.
- Analyze the current warehouse balance.
- Fulfill shipment order demand (including pegged order fulfillment).
- Generate purchase orders according to shipment order demand, maximum and minimum inventory at warehouses.
The main tool to generate purchase orders for demand fulfillment is the Purchase order generation workplace. To enter the workplace, click Purchases — Purchases — Purchase orders — Create — By demands.
With the Purchase order generation workplace, you can cope with the following tasks to maintain warehouse balance and fulfill shipment orders:
- Define a product by which you want to maintain inventory at an established level.
- Set maximum and minimum warehouse balance.
- Analyze inventory level at the warehouse.
- Analyze and follow up product demand by the current warehouse balance, maximum and minimum balance, shipment order demand and expected receipt.
- Get advice on goods quantity to order from supplier (recommended goods quantity is calculated automatically).
- Cancel inventory level control for goods or adjust quantity of goods recommended to order from supplier by the application.
- Determine a goods supplier, agreement and prices according to the data stored in the application.
- Generate purchase orders.
- Place shipment orders in created purchase orders.
In the diagram, you can see the process of generating purchase orders to control inventory level at the warehouse and fulfill demand against shipment orders.
The Purchase order generation workplace is a wizard where each step of purchase order generation is represented on a separate tab:
- Warehouse balance control
- Shipment order fulfillment
- Generated purchase orders
To move from one step to another, click Next on the form of purchase order generation workplace.
Warehouse balance control
To maintain warehouse balance, the application provides you with the following options:
- Define a product by which you want to maintain inventory at an established level at the warehouse.
- Set parameters for maximum and minimum warehouse balance.
- Control inventory level at the warehouse.
- Control the current warehouse balance.
- Determine a list of goods for demand fulfillment.
- Calculate average daily consumption of goods considering sales.
- Get advice on goods quantity to order from supplier.
- Determine a supplier.
On the warehouse inventory control step, you can define a list of goods by which you want to follow up order fulfillment and calculate quantity to order from suppliers to fulfill demand at the warehouse according to the set parameters of minimum and maximum stock balance.
To fill in the list of goods by which you want to follow up demand fulfillment, you can use one of the following methods:
- Standard data processor Select goods: Purchase order generation by clicking Add goods — Select goods.
- Goods selection by any parameters (price groups, product groups, availability in the warehouse, etc). To use this method, click Add goods — By picking.
- Data import from an external file of arbitrary format. To use this method, click Add goods — Import from external file.
Importing data from files allows you to add goods and parameters of minimum and maximum balance that can be previously calculated, for example, in Microsoft Excel spreadsheets to your purchase order generation workplace.
Warehouse balance is maintained according to the current balance and the targeted minimum and maximum balance.
Information on targeted minimum and maximum balance for each product can be:
- Entered manually.
- Calculated. The calculation is made according to average daily consumption of goods for the specified number of days.
There are group commands to fill in the minimum/maximum balance for the selected lines (click the Fill in button when using the purchase order generation workplace). Using group commands, you can set a value of targeted balance (maximum/minimum), or calculate the balance value for the sales period according to average daily consumption.
The minimum/maximum stock balance as well as the actual warehouse balance are counted when calculating quantity of goods to order from supplier to keep balance. Quantity of goods recommended to be ordered by the application is displayed in the To order column of the purchase order generation workplace.
Quantity of goods that needs to be ordered to replenish warehouse balance is calculated for all goods:
- If warehouse balance is less than or equal to the minimum balance, these goods are marked with To order check box. Quantity of goods is calculated using this formula:
Maximum balance ─ Orders to receive (if Balance ≤ Min balance).
In the diagram, you can see examples of calculating goods quantity which is recommended to be ordered from supplier.
- If warehouse balance is greater than the minimum balance, quantity of goods to order from supplier is reduced by the quantity of warehouse balance minus minimum balance. These goods will not be recommended for ordering but you can mark them and order from supplier if necessary (the To order column). Quantity of goods to order from supplier is calculated using this formula:
Maximum balance ─ Orders to receive (Warehouse balance ─ Minimum balance) (if Balance > Min balance).
In the diagram, you can see examples of calculating goods quantity which is recommended to be ordered from supplier.
- If the stock balance is less than or equal to the minimum value, the application will recommend you to order the goods so that they reach the maximum balance level (the To order column). In this case, the calculated value is reduced by the previously ordered quantity of goods. In the diagram, you can see examples of calculating goods quantity which is recommended to be ordered.
Calculation of the current stock balance and quantity of goods expected to be received from supplier depend on the way of shipment order fulfillment selected in the Fulfill orders field:
- Use stock balance — all available goods (the Balance column) and expected goods receipt (the Orders to receive column) are counted.
- Not depending on inventory replenishment — available stock and expected receipts are counted. When calculating balance (the Available stock column) and expected receipt (the Orders to receive column), quantity of goods reserved at the warehouse and allocated to purchase orders is counted.
Please note that whatever method you use, quantity of goods ordered on pegging basis (i.e. for specific order) will be excluded from the calculation.
Average daily consumption calculation
Sales analysis is performed for the period specified in the purchase order generation wizard.
The following documents are used in the sales calculation:
- Internal goods consumption
- Sale adjustment
- Goods shortage slip
- Damage slip
- Transfer of raw materials to toller
- Write off goods shortages
- Goods damage
- Goods misgrading
- Goods issue note
- Sales of goods and services
- Goods assembly
- Retail sales report
- Cash receipt
- Transfer to material provider
Sales for the period are reduced by using the documents:
- Return of raw materials from toller
- Return of goods from customer
- Refund receipt
Average daily consumption of goods is calculated using this formula:
Average daily consumption = Sales / Number of workdays of the warehouse for the period.
The period is calculated from the previous day backwards. Number of workdays is calculated according to the warehouse calendar. If the warehouse calendar is not set, the enterprise calendar is used. Otherwise, all days of the period are considered as workdays.
There are two methods to calculate average daily consumption:
- Method 1 allows you not to count days of "incomplete sales". If there is no balance at the beginning of the day or the item is out of stock at the end of the day, such day and sales of this day are not counted in the statistics. This means that average daily consumption is calculated without including zero balance as of the beginning and end of the day. The following conditions are met during the calculation:
- Start balance in stock > 0 (as of the beginning of the day).
- Closing balance in stock > 0 (as of the end of the day).
This is average daily consumption calculated without including zero balance as of the beginning and end of the day.
- Method 2 allows you to count all sales of the period including days of "incomplete sales".
This is average daily consumption calculated including zero balance as of the beginning and end of the day.
The maximum value received during the calculation by using two calculation methods is considered as a final value of average daily consumption.
Example of calculating average daily consumption of goods if simplified demand fulfillment option is used
Source data:
- Period to calculate average daily consumption: 10/01/2017 — 10/31/2017.
- Sales/consumption for period 10/01/2017 — 10/31/2017: 33 items.
- Number of workdays of the warehouse over the period for which average daily goods consumption is calculated: 22.
- Sales analysis period: 35 days.
If you use simplified demand fulfillment option, calculation of average daily consumption of goods is made by two methods simultaneously.
Method 1—average daily consumption including "incomplete" sales days
When calculating average daily consumption of goods, days of sales for which there is a zero balance as of the beginning and/or end of the day and outflow/sales for these dates are counted (see the diagram).
Average daily consumption of goods is calculated as follows: Sales / Number of workdays of the warehouse for the period = (23 + 2 + 5 + 3)= 33 / 22 = 1.50 items.
Method 2—average daily consumption without including "incomplete" sales days
When calculating average daily consumption of goods, days of sales for which there is a zero balance (as of the beginning and end of the day) and sales/outflow for these dates are not counted (see the diagram):
- 10/16/2017 with consumption of 2 items (Closing balance = 0)
- 10/20/2017 with consumption of 5 items (Start balance = 0)
Example of calculating average daily consumption of goods including "incomplete" sales days is shown in the diagram.
The Goods in warehouses list report contains information on stock balance to calculate average daily consumption for.
Average daily consumption of goods is calculated as follows: Sales / Number of workdays of the warehouse for the period = (23 + 3) = 26 / 20 = 1.30 items.
The maximum value received during the calculation by using two calculation methods will be recommended by the application as a final value of average daily consumption.
Max value of average daily consumption = 1.5 items.
Maximum value of average daily consumption of goods is shown in the Average daily consumption column when using the Purchase order generation workplace.
Shipment order fulfillment
On the Shipment order fulfillment step, you can do the following:
- Analyze quantity of goods to fulfill by shipment orders.
- Analyze fulfilled quantity of goods.
- Get advice on goods quantity to order from supplier.
- If necessary, adjust quantity of goods recommended by the application (the To order column).
- If necessary, cancel goods to order from supplier, or select goods to order.
- Specify a supplier, determine terms for delivery and prices.
On the Shipment order fulfillment tab, you can see a list of shipment orders with items that need to be delivered. Items in the order have an order fulfillment option:
- To supply — goods are out of stock and supply is not planned yet, you should create a purchase order.
- Provide on pegging basis — goods are out of stock. Such goods will be provided on pegging basis for a specific assignment.
If the goods are ordered on pegging basis, the required quantity will be automatically recommended To order irrespective of the selected order fulfillment option. In this case, previously ordered quantity of goods is also counted.
If you order goods with fulfillment option To supply, their quantity recommended by the application To order depends on the selected order fulfillment option.
There are the following shipment order fulfillment modes (the Fulfill orders field) in the purchase order generation work place:
- Use stock balance
- To control inventory level: Balance = All balance, Orders to receive = All orders to receive
- To fulfill shipment orders: Supplied = Available balance + Available from orders to receive + To order
- Not depending on inventory replenishment
- To control inventory level: Balance = Available balance, Orders to receive = Available from orders to receive
- To fulfill shipment orders: Supplied = 0
If shipment order fulfillment is made in the Use stock balance mode, quantity of goods that was ordered to fulfill the minimum balance will be allocated to shipment orders according to demand. This information will be shown in the Supplied column. You will be recommended to order goods quantity that was not supplied on the Inventory replenishment step: To order = Required ─ Supplied .
In the diagram, you can see examples of calculating goods quantity which is recommended to be ordered from a supplier to fulfill shipment orders (in the Use stock balance mode).
If you select the Not depending on inventory replenishment mode, all required goods quantity will be recommended for ordering. When generating a purchase order, this quantity will be added to the quantity of goods ordered for inventory replenishment.
In the Not depending on inventory replenishment mode, you should reserve goods for shipment orders by choosing the fulfillment option Reserve to date. Such shipment orders will be excluded from those needed to be supplied (they will not be displayed in the Purchase order generation workplace).
For pegged lines, quantity supplied for assignment is always counted (reducing the quantity to order).
In the diagram, you can see examples of calculating goods quantity which is recommended to be ordered from supplier to fulfill shipment orders (in the Not depending on inventory replenishment mode).
Creating purchase orders
Purchase orders are generated when you go to step 3 Generated purchase orders of the wizard by clicking Next.
On this step, you can see a list of generated purchase orders. Purchase orders have the Approved status by default.
Purchase orders are generated according to the data you specified on the previous steps: Warehouse inventory replenishment and Shipment order fulfillment.
Information on supplier, agreement, and price will be filled in if goods are ordered from this supplier regularly (according to statistics of previously generated purchase orders). Receipt date is calculated in the purchase order according to delivery time specified in the agreement with supplier.
After you finish working in the Purchase order generation workplace, ordered goods will be automatically placed in purchase orders.
If some items are ordered on pegging basis, an assignment connected with the shipment order will be specified in the purchase orders (the Assignment field).
For items ordered on a regular basis, fulfillment option will be automatically set to Reserve to date of shipment instead of To supply in the shipment order. To use this option, select the Place orders for shipment in purchase orders check box on the Generated purchase orders step.