Vision enables you to create reorder point (ROP) models to specify settings for calculations of reorder points. For each ROP model, you can establish different ROP rules based on four ROP factors: manufacturer, product class, product type, and ABC code. Each set of ROP factors is associated with a reorder points calculation.
During End-of-Month processing and during on-demand ROP recalculations, the system recalculates reorder points. If a product meets a set of ROP factors in the ROP model assigned to the warehouse, the ROP calculations associated with that set of factors is performed.
You have three options for reorder point calculations:
Gordon Graham: This is the default option; it is based on the inventory management principles that Gordon Graham established for distributors.
Following are the equations that are used in the Gordon Graham reorder point calculations:
Reorder Point = Manufacturer's Average Lead Time X Average Daily Usage X Safety Stock Multiple
Safety Stock Quantity = ((Safety Stock Multiple X Manufacturer's Average Lead Time) — Manufacturer's Average Lead Time) X Average Daily Usage
Linepoint = Reorder Point + (Average Daily Usage X Vendor Review Cycle)
The Gordon Graham option is typically used if (1) the warehouse stocks a large number of products in this product line, and they have a heavy turnover and (2) you need to factor in the cost of carrying inventory into your reorder points.
No Reorder Point Calculation: With this calculation type, the system does not calculate the reorder point, the safety stock quantity, the linepoint, or the economic order quantity (EOQ).
This option is typically selected if (1) you are introducing a new product line and you do not have any usage history and (2) you would like to manually set your reorder points until they have an established usage history. At that point, you may want to select a different reorder point calculation type.
Based on Weighted Average Monthly Usage: With this calculation type, the system multiplies the average monthly usage by a number that you specify to calculate the safety stock quantity. To calculate the reorder point, the system multiplies the average monthly usage by another number that you specify. And to calculate the linepoint, the system multiples the average monthly usage by a third number that you specify.
This option is typically used if (1) the warehouse is not stocking a large number of products in this product line, (2) you do not need to factor in the cost of carrying inventory into your reorder points, and (3) you would like to be able to maintain tight control over your reorder points.
The ROP Model screen of the Purchasing tab is where you set up and maintain ROP models. You can also access the reorder point calculation information from this screen.
Note: An ROP model is not used for calculating average monthly usage and reorder points for products until the model is assigned to a warehouse. The System Configuration screen of the Vision Configuration tab is where you assign an ROP model to a warehouse. For more information, refer to Specify ROP settings for a warehouse.
Note: To access the ROP Model screen, you must have the proper security privileges. The ROP Maintenance job function needs to be assigned to one of your roles. Roles are assigned to users in the User Maintenance on the Security Maintenance screen of the Vision Configuration tab. For more information, refer to About roles and job functions.
On the ROP Model screen of the Purchasing tab, select the ROP model on which you would like to work. (For instructions on how to do this, refer to Modify an ROP model.)
Note: Before you can set up calculation data for an ROP rule, options must be selected for each of the rule's four ROP factors (manufacturer, product class, product type, and ABC code) in the ROP Rules area.
Right-click the gray box in the far left column of the rule whose average monthly usage calculations you would like to set up or modify, and then select Change Calculation Data on the shortcut menu. The Average Monthly Usage and Reorder Point Calculations dialog box appears, enabling you to set up and maintain the average monthly usage calculations.
In the Calculation Type area of the Reorder Points Calculation area, select the appropriate kind of calculation that the system should use to calculate the reorder points. You have several options:
If the system should calculate the average usage based on Gordon Graham's calculations, select the Gordon Graham option. This is the default option. The Gordon Graham area appears in the Reorder Points Calculation area.
If the economic order quantity (EOQ) should be calculated, select the Calculate EOQ check box. If it should not be calculated, clear the Calculate EOQ check box.
If the system should not calculate the safety stock quantity, the reorder point quantity, the linepoint, or the EOQ, select the No Reorder Point Calculation option.
If the system should calculate the reorder points based on the average monthly usage, select the Based on Weighted Average Monthly Usage option. The Based on Weighted Average Monthly Usage area appears in the Reorder Points Calculation area.
In the Safety Stock = Avg monthly usage X field, type the number that should be multiplied by the average monthly usage to determine the safety stock quantity. This is the low point for the reorder point calculations.
In the Reorder Point = Avg monthly usage X field, type the number that should be multiplied by the average monthly usage to determine the reorder point. This is the mid-level point for the reorder point calculations.
In the Linepoint = Avg monthly usage X field, type the number that should be multiplied by the average monthly usage to determine the linepoint. This is the high point for the reorder point calculations.
If the EOQ should be calculated, select the Calculate EOQ check box. If it should not be calculated, clear the Calculate EOQ check box.
Click the Accept button to save your average monthly usage calculation data. The Average Monthly Usage and Reorder Point Calculations dialog box closes.
Click the Accept button save your ROP model.
During End-of-Month processing — and whenever the ROP/EOQ recalculation is run on demand — the system checks for changes made to the ROP models and updates the reorder points for every affected product.