by Teamsoft | Jun 15, 2015 | Uncategorised
Purchasing Recommendations produced by EPR systems will always be based on the assumption that the company does not want to run out of stock. This basic premise is flawed and really only applies when the product is in very high demand, it is difficult to get or there is no substitutable alternative. A distributor makes a conscious decision to keep Inventory of certain products and to resell them to its customers. As each new product is taken on, certain attributes of the product are recorded:- static information such as Code, Description, Units of Measure, selling information such are Price, Discount Structures, Web Image etc. A key attribute that is rarely considered in ‘Expected Service Level’. Consider the following: The ‘Required Service Level’ is rarely considered when products are introduced into a company but it is fundamentally important in the control of Inventory. A Required Service Level of 80% tells the purchasing manager that he/she must ensure that the product can be supplied out of stock to a customer 4 times out of every 5 requests. It is OK to be out of stock!! The Service Level is not something that should be randomly set. While certain assumptions have to be made for new products, each product’s history can contribute valuable information. Once accurate demand figures are in place, the analysis of this demand will result in a bell curve like this: The dots represent the demand for a product at a particular point in time. Let’s imagine that each dot represents a week. We can easily calculate the average demand. This is the center point of the graph....
