How do I know the right reorder minimum for each product?
| Intagya ERP
The right minimum is what you use per day times the vendor lead time, plus a few safety days. Example: 6 a day, a 5-day lead time and 3 safety days give a minimum of 48. In Intagya ERP the system works it out every night from the last 90 days of moves and shows it in Reorder suggestions, where you apply it in one click.
In a grocery wholesaler, the reordering rule for rice says: minimum 20. The previous accountant set it two years ago, when the shop sold four sacks a day.
Today it sells six, and the vendor needs five days. A minimum of 20 means the rice runs out two days before every order arrives.
Why does a product run out even though it has a reordering rule?
Because the rule works with the number you wrote, not the right number. It suggests buying when stock falls below the minimum, and if the minimum is small the suggestion comes too late.
The opposite happens too: a product sells less, its minimum stays high, and the system keeps ordering it until the warehouse is full of it.
How do I work out the minimum and maximum for each product?
With three numbers you know or can find out:
- Daily use: what left the warehouse over the last 90 days, divided by 90.
- Lead time: the days between ordering and the goods arriving from the vendor.
- Safety days: a margin for a late vendor or a busier day than usual.
Minimum = daily use x (lead time + safety days). The maximum adds the days between two orders. For the rice: 6 x (5 + 3) = 48 as the minimum. Ordering every 7 days: 6 x 15 = 90 as the maximum.
Ask the vendor for the real lead time over the last three orders, not the one in the contract. The minimum is never more accurate than that number.
Do I have to redo the sums for every product by hand?
Not for hundreds of products. In Intagya ERP the system reads every night what left each warehouse for sales and manufacturing, and the lead time of the product vendor, and suggests a new minimum and maximum for each rule.
In the morning you open Inventory, then Operations, then Reorder suggestions. Each rule shows its current figures, the daily use and the suggested minimum and maximum.
Only rules that move by more than 10% are listed, so you are not asked every day about a small change.
Does the system change the minimum by itself?
Not unless you ask it to. You press Use suggestion on the line, or select several lines and apply them together from Actions. If you know something the system cannot see, such as a coming season or a product you will drop, you leave the line alone.
The Inventory settings have Apply the suggestions by themselves, which applies them every night without review. Our advice: leave it off for a full month, review the suggestions yourself, then decide.
What about products that have no rule at all?
Suggest a rule for every product that sells creates a manual rule for each product that sold without one. Nothing is ordered on its own; the rule shows on the replenishment page for you to decide. It reveals the products you buy from memory rather than from the system.
Reorder suggestions also show under Needs you on the Inventory overview, so you do not have to remember to open the list.
Where do I start?
Pick twenty products that ran out more than once this year. Make sure each has a vendor with a correct lead time, and let the system suggest for one night. Compare the suggestion with the current minimum: a big gap is usually why it ran out.
Read the smart reordering steps in the guide
FAQ
Where does daily use come from?
From what left the warehouse for sales and manufacturing over the last 90 days, divided by the days. You can change the number of days in settings.
What if the vendor has no lead time?
The system uses a lead time from the Inventory settings, 7 days to start with, which you change under Smart reordering.
Does the system buy by itself after a suggestion?
A suggestion only changes the rule. Buying follows the reordering rule as before, and you review it in Purchase.
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