Inventory Replenishment - Solomon Cloud Solutions

Inventory Replenishment

Release 2015

Disclaimer

This document is provided "as-is". Information and views expressed in this document, including URL and other Internet Web site references, may change without notice. You bear the risk of using it. Some examples are for illustration only and are fictitious. No real association is intended or inferred. This document does not provide you with any legal rights to any intellectual property in any Microsoft product. You may copy and use this document for your internal, reference purposes only.

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Copyright

? 2014 Microsoft Corporation. All rights reserved.

Publication Date

September 2014

Contents

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Contents

Introduction

1

Inventory Replenishment Overview................................................................................................ 1 User Guide Overview ....................................................................................................................... 2

What is Covered in the User Guide? ................................................................................ 2 Who Should Use the User Guide? .................................................................................... 2 How to Use the User Guide .............................................................................................. 2

Concepts: How Inventory Replenishment Works

3

Interaction with Other Modules ...................................................................................................... 3 Purchasing ........................................................................................................................ 3 Order Management........................................................................................................... 3 Bill of Material ................................................................................................................... 3 Shared Information........................................................................................................... 4 Inventory............................................................................................................................ 4

Task Flow ......................................................................................................................................... 5 Summary of Task Flow ..................................................................................................... 5 Integrating Inventory Replenishment with Other Modules ........................................... 10 Setting Up and Configuring Inventory Replenishment Parameters ............................. 10 Replenishment Order Planning ...................................................................................... 10 Management of Inventory Replenishment .................................................................... 11 Performance and Profitability Measurement ................................................................ 11

Inventory Replenishment Controls ............................................................................................... 12 Types of Inventory Replenishment Controls.................................................................. 12 Levels of Inventory Replenishment Control................................................................... 13 System Replenishment Controls.................................................................................... 13 Material Type Replenishment Controls ......................................................................... 14 Inventory Item Replenishment Controls ........................................................................ 15 Site Replenishment Controls ......................................................................................... 17 Inventory Site Replenishment Controls ......................................................................... 18 Control Hierarchy for Replenishment Parameters ........................................................ 20

Lead Times .................................................................................................................................... 22 Purchase Order Lead Time ............................................................................................. 22 Assembly Order Lead Time............................................................................................. 25 Transfer Order Lead Time............................................................................................... 25

Demand ......................................................................................................................................... 26 Using Formulas to Project Demand ............................................................................... 26 Using Manually-Entered Values to Project Demand ..................................................... 27 Average Demand Per Period .......................................................................................... 27 Average Daily Demand ................................................................................................... 29 Review Cycle Demand .................................................................................................... 29 Lead Time Demand ........................................................................................................ 30

Safety Stock................................................................................................................................... 31 Manual Entry ................................................................................................................... 31 Days Supply..................................................................................................................... 31 Percentage of Lead Time Demand ................................................................................ 32 Service Level ................................................................................................................... 33 Safety Stock for Critical Inventory Items ....................................................................... 35 Collaborative Forecasting............................................................................................... 35

Planned Orders ............................................................................................................................. 36 Replenishment Calculations......................................................................................................... 37

Replenishment Point ...................................................................................................... 37 Replenishment Position ................................................................................................. 37 Replenishment Quantity ................................................................................................. 37

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Inventory Replenishment

Calculate Trend % ........................................................................................................... 38 Replenishment Policies.................................................................................................................40

Types of Replenishment Policies ................................................................................... 40 Reorder Point Replenishment Policy..............................................................................41 Line Point Replenishment Policy .................................................................................... 41 Economic Order Quantity Replenishment Policy ........................................................... 42 MAX/MIN Replenishment Policy .................................................................................... 43 Order to Replenish Policy................................................................................................44 Comparing Replenishment Policies ............................................................................... 45 Inventory Transfers........................................................................................................................46 Defining Transfer Relationships ..................................................................................... 46 Excluding Non Recurring Transfers ................................................................................ 47 Handling Transfer Relationships to Ensure Accurate Usage Calculations .................. 47 Rolled Up Demand for Central Distribution Site Environments .................................................. 49 How Rolled Up Demand Is Calculated ........................................................................... 49 Problems Avoided Using Rolled Up Demand Instead of Total Usage...........................49 Performance and Profitability Measures ..................................................................................... 50 Customer Service Level .................................................................................................. 50 Inventory Turnover .......................................................................................................... 51 Gross Margin and Adjusted Gross Margin ..................................................................... 51 Return on Investment (ROI) ............................................................................................ 52

Task Guidelines

53

Quick Reference Task List ............................................................................................................ 53 How Do I Adjust...? .......................................................................................................... 53 How Do I Analyze...? ........................................................................................................ 53 How Do I Assign or Update Parameter Values...?..........................................................53 How Do I Calculate ...? .................................................................................................... 53 How Do I Define or Update...? ........................................................................................ 53 How Do I Determine the Value of ...? ............................................................................. 53 How Do I Enter...?............................................................................................................53 How Do I Identify...? ........................................................................................................ 54 How Do I Look Up...? ....................................................................................................... 54 How Do I Measure...? ...................................................................................................... 54 How Do I Replenish...? .................................................................................................... 54 How Do I View...? ............................................................................................................. 54 How Do I Purge Records and transactions ...? .............................................................. 54

Integrating Inventory Replenishment with Other Modules ......................................................... 55 Setting Up and Configuring Inventory Replenishment Parameters ............................................ 56

Configuring System Parameters.....................................................................................56 Setting up Demand Formulas ........................................................................................ 58 Setting Up Lead Time Formulas ..................................................................................... 59 Defining Fiscal Work Days .............................................................................................. 61 Configuring Material Types ............................................................................................. 62 Configuring Inventory Items............................................................................................65 Configuring Sites ............................................................................................................. 69 Configuring Inventory Sites.............................................................................................72 Planning Replenishment Orders...................................................................................................77 Capturing Past Usage ..................................................................................................... 77 Viewing Past Usage ......................................................................................................... 78 Adjusting Past Usage ...................................................................................................... 80 Calculating Replenishment Values for Inventory Sites ................................................. 84 Specifying Additional Demand for Collaborative Forecasting.......................................85 Generating Planned Orders ............................................................................................ 86 Adjusting Planned Orders ............................................................................................... 88 Manually Entering Additional Planned Orders ............................................................... 90 Creating Transaction Orders...........................................................................................91 Managing Inventory Replenishment ............................................................................................ 94

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Valuing Inventory ............................................................................................................ 94 Identifying Purchase Orders with Excess Lead Times .................................................. 94 Identifying Orders and Inventory Sites that Need Attention ......................................... 95 Monitoring New Item Performance ................................................................................ 95 Identifying Current Replenishment Needs .................................................................... 96 Identifying Inventory Sites that Require Target Orders................................................. 96 Analyzing Inventory Performance................................................................................... 97 Identifying Unusual Usage Patterns............................................................................... 97 Viewing Planned Orders ................................................................................................. 98 Viewing Replenishment Parameters Used .................................................................... 99 Measuring Performance and Profitability ..................................................................................100 Analyzing Overall Inventory Performance ....................................................................100 Measuring Customer Service Levels ...........................................................................101 Monitoring Inventory Turnover .....................................................................................101 Calculating Gross Margins and Adjusted Gross Margins ...........................................102 Determining Return on Investment .............................................................................102 Purging Records and Transactions ............................................................................................103

Implementation Hints and Tips

105

Implementation Checklist...........................................................................................................105 Running an Integrity Check ........................................................................................................105 Getting Up and Running Quickly.................................................................................................105

Structuring Site ID Codes and Inventory ID Codes......................................................105 Deciding Which Replenishment Policy to Use ...........................................................................106

Comparing Replenishment Policy Calculations...........................................................106 Selecting an Appropriate Replenishment Policy .........................................................107 Running Process Manager Before Generating Planned Orders ...............................................108 Including a Purchase Order in Lead Time Calculations ............................................................108 Including a Transaction in Demand Calculations......................................................................108 Including Regular Transactions in Demand Calculations...........................................108 Including Drop Shipments in Demand Calculations ...................................................108 Setting Up Transfer Relationships..............................................................................................109 Viewing Planned Orders..............................................................................................................109 Handling Planned Orders for Partial Units.................................................................................109 Using Customer Service Level as Safety Stock Policy...............................................................109

Data Entry or Transaction Screens

111

Sales Orders (40.100.00) ..........................................................................................................111 Sales Orders, Line Items Tab ....................................................................................... 111 Sales Orders, Other Information Tab ...........................................................................112

Shippers (40.110.00) .................................................................................................................113 Shippers, Line Items Tab .............................................................................................. 113

Planned Order Maintenance (41.100.00).................................................................................115 Collaborative Forecast (41.110.00) ..........................................................................................119 Fiscal Work Days (41.200.00) ...................................................................................................121

Maintenance and Inquiry Screens

123

Purchase Orders (04.250.00), Line Items Tab .........................................................................123 Replenishments (10.220.06).....................................................................................................124 Inventory Transaction Inquiry (10.223.00) ...............................................................................126 Inventory Items (10.250.00) ......................................................................................................127

Inventory Items, Replenishments Tab .........................................................................127 Inventory Items, Seasonality Tab .................................................................................136 Inventory Sites (10.255.00) .......................................................................................................137 Inventory Sites, Replenishment Parameters Tab........................................................137 Inventory Sites, Replenishment Values Tab................................................................144 Sites (10.310.00) ....................................................................................................................... 148

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