See Dependent Demand and Independent Demand. Dependent demand —demand generated from scheduled production of other items. Dim weight —see Dimensional weight Dimensional weight —formula used to determine freight charges when the minimum weight-to-volume ratio has not been met.
Friday, May 16, Replenishment Policies and Inventory Planning The two processes of replenishment and inventory are closely related. The inventory planning process establishes the optimal inventory levels that must be maintained to meet expected service levels for demand fulfillment.
What does that exactly mean?
To understand we need to explore the replenishment or re-ordering process. In doing so, we will also establish the decision parameters an inventory planning process provides for the replenishment to work at its most optimal levels.
Replenishment or Reordering Reordering or replenishment process needs to define review period for reordering, and an ordering quantity. Then it needs the inventory parameters to determine whether an order for replenishment should be placed at the time of review or not. Based on how the review period and order quantities are defined, there are a few options to drive the reordering.
Continuous Review and Periodic Review These terms refer to the frequency of review to determine when orders must be placed for replenishment. In the continuous review process, the inventory levels are continuously reviewed, and as soon as the stocks fall below a pre-determined level usually called, reorder point, or reorder levelreplenishment order is placed.
As more and more companies start using sophisticated IT systems to track their inventories in real-time, the continuous review method becomes a viable and optimal way to plan for replenishment.
Under periodic review, the inventory levels are reviewed at a set frequency. At the time of review, if the stock levels are below the pre-determined level, then an order for replenishment is placed, otherwise it is ignored till the next cycle.
This method provides a viable process alternative to the continuous review by segmenting the merchandise into review buckets.
This makes it easier to manage when the process is manual, or the number of items involved is extremely large, or when constraints on ordering-day exist.
Order Quantity and Order up-to Level These terms refer to the process that is used to determine how much is ordered when a replenishment order is placed. If the review determines that an order should be placed, then the order for a pre-defined quantity for that item-location combination is placed for replenishment.
The order quantity for all replenishment orders is fixed in this method, though order day may vary or may be fixed depending on the review method.
The order quantity in this process will differ from one order to another depending on the on-hand quantity on the day of the review. Between these two sets of parameters, four basic reordering process options become available.
Options for Re-ordering Process Based on the above two parameters, the reordering process can be deployed in the four basic ways. The diagrams below depict these variations of the process.
Inventory Planning The two key inputs to optimally run the reordering processes above are the inventory safety stock and reorder levels. These parameters control two of the most critical factors in a supply chain, the amount of inventory, and the ability to maintain favorable service levels.
And both of these are defined by the inventory planning process. As the demand and supply patterns change, the optimal inventory levels required to guarantee desirable service levels also change.
Due to inherent variability in the demand and supply streams at any supply chain node, the ability to service demand directly depends on the safety stock. It helps in maintaining user defined service levels that guarantee desirable fill-rates to fulfill the demand. Here is a quick synopsis of the inventory planning or optimization process that determines the optimal inventory levels to meet a desired service level.
Inputs to Inventory Optimization As shown in the picture, the inventory planning process takes the following inputs.
Desired Service Level -- this is normally a user provided input. The desired service level depends on the item in question, its sales attributes, demand, profitability and associative relationship to the other items. Users normally define groups of items that have similar attributes to define and manage the service levels.
Demand -- this is the historical and projected demand for the item at the location. Note that the demand at a location like store will be the POS point of sale history, while demand at a distribution center is simply the requests that stores placed on the DC.
If the store requests on the DC are not available, one could use the outbound shipments as an approximation of such demand. Supply -- this is the historical and projected supply of the item at the location."What Is The Difference Between A Requirements Philosophy And A Replenishment Philosophy Of Inventory Management Why Is This Difference Important" Essays and Research Papers They are some difference between a replenishment philosophy and a requirements philosophy.
In the essay I will describe my personal philosophy of .
The evolution of collaborative, planning, Forecasting and replenishment (cpFr) as a supply chain • Inventory Management and Operational Efficiencies the least influence to move the inventory is the definition of network stuffing.
in this scenario. The demands doctrine of stock list direction and control purposes to equilibrate short term lower stock list and higher client service. The stuffs demands planner first determines the entire sum Read More "Operations inventory management: Defining replenishment from requirements philosophy Essay".
In general, Lean can be viewed as a philosophy of operations management, i.e. it gives a clear view which can be used to uide the way operations are managed in many different contexts. Several techniques are used to support this philosophy.
OPERATIONS MANAGEMENT TOPIC OUTLINE CONCEPTS AND APPLICATIONS ͕ Define the theory of inventory replenishment management ͕ Describe the difference between continuous and periodic inventory review ͕ Describe the evolution of the lean philosophy and techniques.
With regard to inventory management, discuss the difference between a replenishment philosophy and a requirements philosophy. Replenishment philosophy is used for independent demand. As the stock is used, it is replenished so that products are always on hand for customers%(5).