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Suggested Stock Levels

When doing a suggested order for items that use the 'Min/Max From ROS' method, the system uses the minimum/maximum stock levels for the specific item and a specific store (see Suggested Orders for more information). But how are these values set?

The EOD process Suggest Stock Levels uses a history of sales and requested levels of stock cover to calculate the minimum and maximum stock levels. Stock cover is the number of weeks of sales that a store is allowed to have, for example the store is allowed to have a minimum of one week's stock and a maximum of two. So if a store has sold an average of three units of stock a week, and the minimum stock cover is one week, the minimum stock level is three (1x3). If the maximum stock cover is two weeks then the maximum stock level is six (2x3).

There is no need to run this process each night for the same items. The stock levels will simply not change enough. It is also a very intensive process. The recommended approach is to run the process each night for different products. So Monday night you might run the process for beverage items and on Tuesday you run it for food products from supplier ABC.

Setting The Stock Cover

Stock cover is one of the most important numbers used to calculate stock levels. It is set up in the Category Maintenance function. It can be set up for any level of D, D/C, D/C/G or D/C/G/SG. You select the required department, or department/category, and so on, and view the Suggest Orders tab. On this tab, you can set the minimum, maximum and reorder stock cover for a location or a location group.

The system will look for the most specific D/C/G/SG for a location. If it can't find a record, it will look for the D/C/G for that location, then the D/C, and so on. If no details are found for the location, the system will get the location's parent and repeat the D/C/G/SG checks for that location. This continues until a record is found or a location has no parent.

Seasonal Factors

Some items sell better during a specific period, for example ice cream in summer. You can make a seasonal adjustment which will alter the minimum and maximum stock levels. If the maximum stock level was calculated as 40 units and the seasonal factor was 1.25, the maximum stock level would be set to 50 (40 x 1.25). The seasonal factor is recorded in Category Maintenance the same way as the stock levels were. Go to the Suggest Orders tab and enter the factors in the Seasonal Adjustments grid.

Display Facing and Lead Days

There are two other numbers which are used in calculating minimum and maximum stock levels. The use of these numbers in the calculation is described later in this document.

The Display Facing is the number of units that are visible on the front row of a shelf. If you pack your shelf so its two units wide and five deep, your Display Facing is two. This number is recorded on the Range tab in Items. It can be set for each individual location that has the item.

The Order Lead Days is the number of days it will take for the goods to be delivered once an order is placed. When calculating lead days, the system will look for the order frequency for the item. If none is available, it will use the default lead days entered on the Ordering tab in Supplier. If a code is available, it will look up that code and check the lead days set for each day of the week. It will use the highest available lead days for the week (this gives it a worst case scenario). In the System Settings System 2 tab, the max order frequency day setting is configured. The default setting for this option is checked which means use the MAXIMUM value of all the specified order frequency day settings, no matter when the suggest function is run. If the settings is not checked, the value for the order frequency days is that for the day of the week on which the function is run.

Calculating The Numbers

The actual numbers are calculated using the EOD process called Suggest Stock Levels. This can be run interactively or as part of end of day. The process requires the following options to be filled in.

Location

The location to calculate the numbers for. If this is a group, levels will be calculated for all specific stores within the group.

Where Variance > %

This is a percentage variance. It the variance of the current stock level and the new calculated stock level is greater than this value, the new calculated stock level is recorded. If the variance is less than this number, the stock level will not be changed.

Calculating stock levels is not an exact science. You are basing it on historical sales which you are hoping will be maintained in the future. You are basing it on stock cover levels you believe to be sufficient. So if the calculated stock level is only 2% different to the current number, it is not really worth recording this new number and making the system work harder than it needs to.

Seasonal Period

The period you want to use for the seasonal adjustment. The system will look for a seasonal adjustment where the from and to period range covers this requested period.

When run as part of an EOD process, this can be scheduled to be a relative period ($THIS_WEEK) instead an absolute period (2009.14).

Sales Period

The sales period range to find sales for. This is used when calculating the rate of sale. The range of weeks depends on the type of goods being sold. Some items work better using a thirteen week range, others work better with a two week range.

When run as part of an EOD process, this can be scheduled to be a relative period ($LAST_WEEK-12 to $LAST_WEEK) instead an absolute period (2009.02-2009.14).

Items To Be Ordered

This set of options simply controls the items that we want to calculate the stock levels for. You can enter as many criteria as you want.

When the Process button is pressed the system will start calculating the stock level numbers. It will find all items that need to be processed. For each item, it will attempt to calculate the stock levels.

The first number required for calculating the stock levels is the rate of sale for the item. The rate of sale will be based on the requested sales period but the system will do some extra checks on the item. It is no use calculating rate of sale for a thirteen week period if the item was only available two weeks ago. The rate of sale calculation will be understated and therefore the stock levels will be too low.

If the release date of the item has been set and it is later than the start sales period, the rate of sale will be calculated starting from the release date. If the release date is not set, the system will check the date the item was actually created. If this is later than the start sales period, the rate of sale will be calculated starting from the creation date.

The system also keeps track of when the store range information was created for a specific store. So if the item was released six weeks ago, but a store has only just ordered it, the range record will be created for this week. Therefore, the rate of sale will start from this week.

At this stage we now have a rate of sale. The system then needs to get the various stock cover numbers from Category Maintenance for the item's D/C/G/SG. At the same time, it will get the seasonal factor for the specified Seasonal Period.

The system now has all the information it needs to calculate the stock levels. As the stock levels are calculated, all numbers are rounded to zero decimal places. It will calculate the minimum stock level and then it calculates the lead stock level. The lead stock level is the minimum stock required, taking into consideration the delivery time of the item and the display facing. If this number is higher than the minimum stock level then it becomes the new minimum stock level.

The calculations are as follows:

Min Stock Level = Min Stock Cover x Rate Of Sale x Seasonal Factor

Lead Stock Level = Supplier Lead Days / 7 x Rate Of Sale x Seasonal Factor + Display Facing

if Lead Stock Level > Min Stock Level then

Min Stock Level = Lead Stock Level

Reorder Stock Level = Reorder Stock Cover x Rate Of Sale x Seasonal Factor

if Reorder Stock Level < Min Stock Level then

Reorder Stock Level = Min Stock Level

Max Stock Level = Max Stock Cover x Rate Of Sale x Seasonal Factor

if Max Stock Level < Min Stock Level then

Max Stock Level = Min Stock Level

If the variance of the current and new values for either minimum, reorder or maximum are more than the specified variance, the store range information will be updated with the new stock levels.

A report is generated for the changes (need to select All reports in Report Manager) and a text log file is. The log file will be stored in the Log Files directory and will be called SuggestStockLevelTempyyyymmddhhnnss.txt, where yyyymmddhhnnss is the date/time the process was run. It will show the items processed and the changed stock levels.

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