From this flow assessments of service level, fill rate, and reorder point (min).Ī prescription of what to do when there is a stockout. SmartForecasts’ key analytical computation is estimation of the probability distribution of lead time demand. Lead time demand is a random quantity totaling all the demands that arrive during the lead time. Inventory ForecastingĪn inventory management process that predicts future inventory levels, costs, and service level performance. The more safety stock, the lower the risk of stocking out. In an inventory control system, the reorder point is comprised of the cycle stock and the safety stock.

The portion of inventory that is expected to cover the lead time demand. By increasing safety time, orders will be triggered sooner thereby minimizing the risk of stockouts. The amount of days added to the lead time to accommodate for increases in supplier lead time. If you would like to order 7 but your supplier has an order quantity minimum of 10, you are stuck ordering 10.Ī way to determine inventory requirements based on an easy-to-understand rule such as “order 10 days’ worth of supply every time inventory falls to 5 days of supply.” Some suppliers require that any order be at least of a certain size. Order quantities are often negotiated with suppliers rather than simply calculated from an item’s demand history. The Min is comprised of the cycle stock (expected lead time demand) and safety stock (to protect against demand and supply variability).Ī fixed number of units to order when the reorder point has been reached or breached

The level of inventory which, when reached or breached, triggers replenishment. You can use SmartForecasts to do “what if” analysis, examining the gains to be made from reducing lead times. The shorter the lead time, the more lean and agile your operation. The lead time might be composed of several intervals: the time to sense the problem, the time to request purchasing to get more, the time until purchasing actually cuts a purchase order, the time for the vendor to deliver, and then the time to restock.

Lead time is the interval between inventory realizing that you need more stock, i.e., detecting that inventory has dropped to or below the reorder point or min, and its arrival back in stock. What’s the difference between fill rate and service level? Accordingly, fill rate and service level can be very different numbers. Fill rate differs from service level in that it takes account of how large a stockout is, not just how often a stockout happens. Expressed as a percentage: A 90% fill rate means that 90% of the units demanded, on average, are immediately available. Under a backorder policy, any units demanded but not provided immediately are provided later, when available.Īn item availability metric that measures the fraction of items demanded that are supplied immediate from stock on hand. A prescription of what to do when there is a stockout.

Stock lingo bups