# Reordering policy

Hey, can anybody help me with the following questions regarding maximum inventory reordering policy: 1.if I choose the maximum inventory reordering policy how is the quantity to be reordered calculated: does it equal to the maximum quantity minus inventory status(=quantity on hand + quantity on purchase orders - quantity on sales orders); 2.is the order placed when the inventory status is less than order point; 3.if the order point is the expected (average) demand during lead time how can I take into consideration the sales plan for a future period; for example if I have past sales figures for a product and a sales plan for a product group can I use these figures somehow to come to the expected demand for a product to calculate the order point; 4.how is the reorder quantity field used when the quantity to be ordered is calculated; 5.as far as I know these fields have to be filled manually before one can calculate plan n the requisition worksheet; is whre any way to automate the process of calculating reordering parameters. With kind regards, Anton [?]

Hi Anton Okay I will do my best to cover the questions asked. You refer to an “order point” I am taking this to be the reorder point of the item card. I will illustrate this with an example and then try and answer your questions. I have set up a new item. It has a 2-week leadtime and a Maximum inventory of 1000 with a reordering policy of Maximum Qty. I have 0 inventory. I load a sales order for 10 with a planned delivery date of 31/01/04 and a planned shipment date of 30/01/04. MRP will generate an order for 1010, to cover the sales order and replenish up to the maximumn inventory. The end date of the order will be 29/01/04 with a start date of 15/01/04 (10 working days, or the 2 week lead time). If I had a purchase order released within the period, MRP would tell me to alter the quantity upto 1010. If I find 100 and book them into stock, and then run MRP nothing will be generated as stock is greater than demand. Naturally if you then add in reorder points and safety stock the calculation becomes more complicated. The help will tell you that the Maximum Quantity must be greater than the reorder point and again the reorder point must be greater than the safety stock. I am aware of a few issues with Maximum quantity, and I am unsure of your version, but on 3.70 you need to be on at least hotfic 14, and preferrably the latest if it is 3.60. So to answer you questions: 1. If you have QOH and the demand breaks the reorder point, the maximum quantity will be ordered, if purchase orders exist it can, depending upon the set reorder cycles, tell you to alter the quantity. 2. This should be yes. 3. You can include a sales forecast in the Production Forecast that will be used (if the system is set up to do so) during the planning routine. This will not, as standard, be used to calculate an order point. 4. The reorder point is used as a trigger to calculate the replenishment when demand breaks the reorder point. 5. The fields will need to be filled in manually. If you have the data reordering parameters could be calcualted for you, but different industries utilise different formulas to obtain the necessary figures, so this would need to be written specifically for you. I hope this helps.

Thank you Steven, now I have another issue to clear: why for maximum quantity policu maximum Quantity has to be greater than the reorder point and for fixed reorder quantity policy reorder quantity has to be greater than reorder point. Fore example if I have a lead time of 45 days days but I would like to order no more than for 30 days of sales ( I would always have some quantity on purchase orders)a I can not do that because for a program it is not logical (or al least Help sees so) With kind regards, Anton[?]

Hi Anton The reason for this is that if the reorder point was larger than maximum quantity it will tell you to order the maximum quantity twice, which is not logical, the same with the safety stock as this is taken into consideration on calculating the inventory level. It seems to me you are not using the maximum inventory reordering policy in the correct circumstances. Maybe consider using a different policy on the items where you want the reorder quantity to be less than the reorder point? The purpose of the maximum quantity is to reorder a mass amount - covering all safety stock, reorder points and requirements in one go. Why are you using the maximum quantity in these instances?

Hey Steven, but this is the same with fixed reorder quantity policy: reorder quantity has to be larger than the reorder quantity; under normal circumstances this is O.K. but then the case is the same as I told for maximum inventory policy (lead time is 45 days but I want to order for 30 days - once a month)how can I order less than the reorder point. Is the lot-for-lot policy suitable ? But then I check the Calc.below reorder point ? With kind regards, Anton

Hi Anton Could you just please clarify something for me: Your lead time is 45 days, which equates, fro instance to 45 units, you want to order 30 units to cover a month, and do this EVERY month, irrelevant to demand? Could you give me an example of what you WANT the system to do?

Hey Steven, I want to make ´the replenishment dependent of demand because the comapny I works for resells goods both wholesale and retail: 1.reorder point would be forecasted demand in the lead time (ore example 45 days) + safety stock; 2.quantity to be ordered would be the forecasted demand during reorder cycle(for example 30 days). But I also need a way to round up the quantity to be ordered dependent on minimum, maximum order quantity. With kind regards, Anton

Hi Anton Two suggestions for you to try - I obviously do not know the details of each case, so let me know where the concepts fail 1. Item is set with a reordering policy of fixed reorder quantity Set your reorder cycle as 30 days stock Set your safety stock to your required level Set your reorder point as 45 days stock Set Set order factoring with appropriate Reorder Quantity, Minimum order quantiity, Maximum order quantity and Order Multiple. 2. Item is set with a reordering policy of Lot-for-Lot Set your reorder cycle as 30 days stock Make the safety stock your 45 days stock + safety stock quantity Set order factoring with appropriate Minimum order quantiity, Maximum order quantity and Order Multiple. You’ll have to trial these through with specific settings and see what happens.

Dear Steven, 1 question regarding the first concept: how can I go around the logical limitation that reorder quantity must be larger than the reorder point. With kind regards, Anton

Dear Friends, I have been chasing this thread for a while now and as far as Navision goes it may be OK but I think I need to add a bit of theory and basics which has nothing to do with any application( Navision or SAP or JDE). 1. MRP has generally three reordering policies: a) Time Phased MRP: which takes inputs for MRP from demand of independent items in the time buckets required. b) Reorder Point: Orders a fixed quantity when stock reaches a predefined reorder point( beware of seasonalities and trends in demand) c) Min/Max: Orders for items equal to differnce in current stock and max required. b) and c) usually done for general consumables which are not part of BoM and are usually C class items. Secondly Reorder Point= DDLT + SS Unlike in other high end ERPs Navision does not differentiates b/w these MRP policies and puts everything on the item card, adding to the confusion.

Hi Devinder -

quote:

Unlike in other high end ERPs Navision does not differentiates b/w these MRP policies

I do not think I can disagree more heartily! In 3.70 the reordering policy defines all of these policies, in 3.60 this is hidden a little deeper - the requisition method code contains the reordering policy - please read the help on this field. With the reordering policy on the item card, each item can be set with its own policy, rather than having a system dictated policy that is incorrect for 35% of your stock. Most systems I have seen actually adopt this method, although some are on/off on the item to say if MRP should include it or not.

Actually both of us are saying the same thing, I can not explicitly choose the policy. Secondly there are chances of inflated inventory with mixing the policies further. Still in 3.7 I can do Min/Max through Reorder point only.

There is more chance of inflating inventories with a global setting as the policies are not flexible. In my experience, the settings against items are managed poorly, and inventories are generally overstated due to the lack of control of the planning and reordering system. Many companies cannot see the value of having a dedicated planner, but bemoan the cost of high inventories. It is also a case of many users not actually understanding the systems and fulfilling what the system tells them because they have always done this and never questioned it.

Hey Steven, all the reordering policies use the concept of net requirement for a period(=inventory on hand at the beginning of the period + purchase orders coming in during the period - sales orders to fulfilled during the period). This is OK for manufacturing environment and for wholesale environment but for retail it is not OK, because while ordering I have to foresee all the sales during the planning period and not all the planned sales is on the sales orders: if I would have only retail, nothing would be on the sales orders. How can I include the sales forecast into the reordering of retail stock? With kind regards, Anton

Hi Anton You will need to transpose the sales plan into a production plan and enter a production forecast. The demand planner Erik refers to http://www.mbsonline.org/forum/topic.asp?TOPIC_ID=9377 may assist in this area, but like him I am unsure of its detailed functionality.

Hi Steven, if I understand you correctly I can use the forecasting functionality in Navision also for purchased items (as I understand, as a standard it is meant for produced items: by entering production forecast for produced end item I create a demand for components, either produced or purchased). With kind regards, Anton

Hi You will need to run it through but you can certainly forecast component usage.

Hey Steven, I am sorry, let me rephrase my question. Can I enter a sales forecast for items with independent demand (in my case items bought for resale) and use this forecast to lead the “calculate plan”-function on the req.worksheet. I didn’t find in Navsion 3.7 a way to enter a sales forecast(I found production forecast, but I can’t use it since it can only be used for component parts: my previous question from Feb.17 was incorrect). Anton

Hi So the Production Forecast and Forecast Type:Sales Item?

Hey Steven, thank you, it worked (we only problem is that we are in a retail and wholesale business so we naturally didn’t buy a licence for production). Anton