I am discussing planning parameteres with a customer and would appreciate the forums advice on how best to configure an item to best meet the customers requirments. The situation is that the item in question is normally turned over at a steady rate but will occasionally be subject to large one-off sales demands. Currenltly the replenishment of the slow, steady stock turnover is facilitated by a reorder point that specifies anticpated demand in the lead time of the item. However, when one of these large sales orders occurs all the stock is taken and even though the planning immediately attempts to replenish this, the fact that there is such a long lead time on the item means that the customer can be without stock for a prolonged period of time. Any ideas would be greatly appreciated. Chris.
Hi Chris Setting up the item to cover this sceanrio will be a balancing act. Essentially it is the age old balance of customer satisfaction against tied up cash in inventory. Approaching this a different manner the long lead time could be resolved if the item is valuable enough by negotiating with the vendor. If the customer knows demand is constant apart from the occassional blip they can commit to buying the yearly supply from the vendor, for instance commit to taking 1000 a year, but to faciliatate this the vendor has to hold 50 in stock for you. In this manner you can keep the reorder levels at the set rate, and your own reorder level combined with that held at the suppliers will ensure you are not out of stock at all, let alone for a prolonged period of time. If no arrangement can be made with the supplier the customer will have to weigh up the costs of being out of stock for a prolonged period of time against the cost of holding excess amounts of stock. Navision will be able to assist in what you should order, but the decisions and supply chain management of it will need to be handled by the customer. Sorry - but it is never an easy answer [:D]
Thanks for the reply Steven. I did suspect that there was going to be no easy answer for this and the best way to deal with these situations was going to be on a management or operational level rather than relying on the planning parameters. I will go and give the customer the good news… Thanks again, Chris.