Planning Considerations

Much of the information used in calculating planned order requirements is stored in the branch inventory record (maintained by IMB and displayed by IMBQ).

Minimum order quantity is the smallest quantity for which a planned order will be generated. This should be the item's economic order quantity (EOQ); i.e., the quantity that must be purchased or manufactured at one time to minimize the combined costs of acquiring and carrying inventory.

Lot size is the multiple of the item that you want to use when the item is purchased or produced. This quantity may be a factor of the production process or in how the product is packaged for subsequent use. For example, the lot size may represent a full pallet or container of the item.

Max planning period represents the number of shop days for which a single planned order should provide coverage. Using this feature means that a new order will be created after the same period of time regardless of the demand for the period. If your demand fluctuates this can be a good way to reduce setups.

Spread forecast determines how forecast is converted to demand and how supply (i.e., planned orders) react to the demand.

The longer the period that you forecast the bigger the assumption that your demand is stable over time. The shorter the period of time, the more you want to impact the demand pattern because of seasonality, product life cycle, etc. For example, if you have a very stable demand pattern you can use a forecast period of a year and then a spread forecast of five work days to spread the forecast into weeks. Assuming no other planning factors, the system would simply plan the orders for the same quantity once a week. Note: Actual orders consume the forecast, so in reality you will have different quantities planned. So if you sell say 5,200 units a year and have a spread forecast equal to a production week you will see the demand of 100 at the start of each weekly period and then a planned order to offset it. Not many companies have such stable demand, so the forecast is typically created by product and in smaller time periods.

Another part of determining the spread forecast is how your customer orders the item. If only one customer orders the item once a month, then it won't make much sense to spread forecast by week. Your best course of action is to work with customers to determine their future needs and generate the appropriate forecast. Weekly demand periods are fairly common in businesses that receive daily orders from many customers.

Whether an item is purchased or manufactured also impacts how best to plan for it. Considerations for make items:

• The production process itself. For example, the initial production step to mix up a standard batch of ingredients may be based on the raw material that is consumed.
• The setup time for production processes can be fluid, as it usually depends on what ran just before this item. You may not need a full setup if the item previously produced has some common setup details.
• The goal is to keep reducing the setup time and thereby reduce the quantity you manufacture at one time. For example, assume a 4-hour setup time and you make a two-week supply each production run. If you can reduce the setup time to 2 hours you can reduce the production run to a week's supply. Smaller production runs allows you to run a larger variety of items to satisfy the customer demand in a shorter time frame.

Considerations for buy items:

• If you place individual purchase orders, be aware of price breaks so you place your orders wisely. It may be more cost effective to order the quantity at the next price break.
• If you use the supply chain feature you can negotiate a unit price based on the contract quantity and not on individual purchases.
• Freight associated with incoming receipts is sometimes overlooked. If you are responsible for paying the freight you need to consider how that impacts your purchase plan. Many vendors offer free shipping for orders that meet certain criteria.

Take a look at what you purchase and manufacture and focus your efforts on the class A items. If obsolescence is not a big consideration, maybe it's worth planning for a year's supply of class C items if it means you can turn over the class A items more frequently. Let PowerShift’s planning functions do 80% of the work so you can put your time into tweaking the plan for the top 20% of the items.

If you have questions about forecasting or planning, contact the Qantel Helpdesk or call us at 630.300.6997. And if you're not sure how to get started, consider scheduling a Planning Overview webinar. We think webinars are an excellent use of your contracted support time – and we think you will, too!