Terms used in inventory replenishment are described below.
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An ABC code indicates how fast a stock or temporary product moves in a warehouse. For example, if a product has a high turnover rate, then it is a fast mover. The ABC codes can be used to determine how much of stock product to buy and when to order to assure the right turnover. You can use an ABC model to rank products based on average monthly usage during a rolling 12-month period in one or more warehouses. The system then assigns ABC codes to products based on those rankings. The ABC Model screen of the Purchasing tab is where you set up an ABC model. For more information, refer to Set up a new ABC model. The System Configuration screen on the Vision Configuration tab is where you select an ABC model for a warehouse. For more information, refer to Specify ABC classification settings for a warehouse. To learn how the system updates the ABC code and the other replenishment-related factors, refer to Overview of inventory replenishment. |
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A product's average daily usage is calculated by dividing the average monthly usage by 22. |
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The average monthly usage is used to calculate the reorder point, the economic order quantity, safety stock, and the linepoint for a product. You can use reorder point (ROP) models to specify settings for calculation of average monthly usage. For more information, refer to Set up or modify an average monthly usage calculation for an ROP model. To learn how the system calculates average monthly usage and other replenishment-related factors, refer to Overview of inventory replenishment. |
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This is one of the factors used in determining the reorder quantity. You can use reorder point (ROP) models to specify settings for calculation of the EOQ. For more information, refer to Set up or modify reorder point calculations for an ROP model. To learn how the system calculates and updates the EOQ and other replenishment-related factors, refer to Overview of inventory replenishment. |
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Gordon Graham is a leading expert in the field of inventory management. He has written several books on his proven distribution management theories and calculations; his theories and calculations help distributors determine how much of a stock product to buy and when to order to assure the right turnover with the lowest outgoing cost. Graham's theories and calculations were used as a guide in the development of the purchasing system in Vision to increase the accuracy of the stock replenishment process. To learn more about Graham's calculations, refer to Overview of inventory replenishment. |
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The linepoint sets the outside (maximum) quantity limit for including the product on a pending purchase order for the primary vendor. You can use reorder point (ROP) models to specify settings for calculation of the linepoint. For more information, refer to Set up or modify reorder point calculations for an ROP model. To learn how the system calculates and updates the linepoint and other replenishment-related factors, refer to Overview of inventory replenishment. |
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The manufacturer's lead time is the number of days between purchase order activation and receiving dates for a stock product (excluding drop shipments). The average lead time is used during End-of-Month processing to calculate the reorder point and the safety stock quantity; it is included on the Replenishment Action Report as the lead time for the product. The manufacturer's average lead time can be established separately for each warehouse. Two methods for calculating the lead time are available:
—or—
The System Configuration screen on the Vision Configuration tab is where you specify how the manufacturer average lead time should be calculated. For more information, refer to Specify how manufacturer average lead time should be calculated in a warehouse. To learn how the system calculates and updates the manufacturer's average lead time and other replenishment-related factors, refer to Overview of inventory replenishment. |
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This is the quantity multiple in which you must purchase this product from the primary vendor. For example, let's say that when you purchase a particular part from the vendor, your order quantity must be in the each unit of measure. However, the vendor sells this part in packs of four only. Therefore, you would set the master pack quantity for this part to 4. To learn how the master pack quantity affects replenishment, refer to Overview of inventory replenishment. |
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The per car quantity is the quantity multiple in which you want to stock the part. Customers are not required to order this part in multiples of this per car quantity. For example, if the part is a battery, the per car quantity is 1. However, if the part is a tire, the per car quantity is 4. To learn how the per car quantity affects replenishment, refer to Overview of inventory replenishment. |
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This is the on-hand quantity that triggers the system to automatically include the product on a pending purchase order for the primary vendor or on a replenishment transfer order. The system's built-in calculation for reorder point takes into consideration that enough merchandise (usage) must be ordered to fill customer orders during the time required to get more stock (lead time); at the same time, a safety allowance needs to be included to ensure that minimum stock requirements are met. You can use reorder point (ROP) models to specify settings for calculation of the ROP. For more information, refer to Set up or modify reorder point calculations for an ROP model. To learn how the system calculates and updates the ROP and other replenishment-related factors, refer to Overview of inventory replenishment. |
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This is the targeted net bottom line that you want to reach by adding extra money into inventory. The system uses the ROAI factor when calculating the extra quantity to buy before the vendor increases the price. This extra quantity is incorporated into the recommended order amount. To learn how the ROAI affects inventory replenishment, refer to Understand inventory replenishment processing. |
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This is essentially the minimum number of days that is used to calculate the minimum stock level necessary to fill orders. The safety stock multiple is used in determining the safety stock quantity and the reorder point during End-of-Month processing and on-demand ROP/EOQ recalculations. To learn how the system updates the safety stock multiple and other replenishment-related factors, refer to Overview of inventory replenishment. |
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This is the safety allowance that takes care of reasonable variations in usage or lead time from the averages anticipated. It is the minimum amount of stock necessary to fill orders based on average daily usage and the manufacturer lead time. You can use reorder point (ROP) models to specify settings for calculation of the safety stock quantity. For more information, refer to Set up or modify reorder point calculations for an ROP model. To learn how the system calculates and updates the safety stock quantity and other replenishment-related factors, refer to Overview of inventory replenishment. |
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This is how many days you would need to wait before purchasing from the vendor so that you have a large enough purchase order (in dollar amount) to be eligible to have the freight charge waived). For example, a vendor might say that freight is free if you order $12,000 worth of products. The following equation shows how the vendor review cycle is determined if it does not need to be protected:
You can change the following Vendor Review Cycle parameters under the Vendor Maintenance tab on the Purchasing screen:
To learn how the system updates the vendor review cycle and other replenishment-related factors, refer to Overview of inventory replenishment. |