Minimum Stock Levels and Reordering

Finance and Operations/AX Technical Forum
1

Good afternoon

I`m just trying to understand when the reorder is triggered on D365 MRP. By way of background we are using MRP to control our inventory on a purchasing system, not for planning/manufacturing, i.e. it is consumption-based.

I understood that reordering should occur once you reach the min level, but speaking to colleagues, it appears that reordering is only triggered once we reach one below the minimum level (i.e. if min is 3, then you have to reach 2 before a reorder is triggered). For me, as soon as the stock level hits 3 it should reorder, not wait until 2 and the current setup seems counter-intuitive?

My initial view is we should really be applying the safety stock process whereby a reorder point is set, that takes account of the procurement lead time, so in effect the minimum level is never breached.

Grateful for any thoughts please.

Regards

Tucker

2

Hi Tucker, the min-max logic is that if you have in stock the minimum inventory assigned for the item you are ok, it is triggered once it is below the minimum, not equal to the minimum. The minimum level is not supposed that never should be breached, it can be breached but the quantity remaining based on your calculations should give you enough time for replenishment without backorders. So it is important the way you calculate the minimum value, consider historical demand, estimated daily consumptions, warehouse space, financial impact, etc

3

If you want to anticipate when a minimum inventory is going to be breached, then you need to have in place future demand (forecast, sales orders, production ordes, etc) then the master planning process can calculate when you are going to be under the minimum and will suggest you to purchase or produce with proper anticipation based on leadtimes. If you don’t have future demand available in the system, then min-max will only be triggered once below the minimum

4

Hi Hector,

thanks for your prompt and comprehensive response. Can you impose a reorder point above the minimum level or perhaps I should consider applying the safety stock principle so I never fall below the minimum level?

Thanks again Hector.

Regards

Tucker

5

Thanks once more Hector. As we`re running a consumption-based approach, then future planning is not used/available. Am I right in saying that a safety stock approach is worth considering?

Regards

Tucker

6

As per my understanding, what you call “reorder point” should be your minimum quantity

7

Yes it is, but then, your min qty should be what you consider the reorder point, giving you enough time to purchase and receive more inventory

8

Hector,

thank you. You`ve been extremely helpful. Appreciated.

Tucker

9

I am completely agree to the Hector’s approach, I am certain that this will meet your requirements Tucker…