Configuration of Replenishment: Replenishment Methods

Replenishment methods are used to calculate the replenishment quantity. MYOB Advanced supports replenishment at a fixed quantity and replenishment between the minimum and maximum quantities.

The Replenishment tab of the Stock Items (IN202500) form has a row for each replenishment class to be used to replenish the stock of the item. Each row holds the settings associated with that class, including the replenishment method and the replenishment source. The default option in the Method column is None, which indicates that no replenishment will be performed. In each row, you specify either of the following replenishment methods to be used for the item with the source selected in the row:

  • Min./Max.: You use this method to keep the stock level of an item at a particular warehouse between the specified minimum and maximum quantities. If you are using the Moving Average demand forecast model, the system calculates the demand for a specific future period based on historical sales data. For details, see the following section and Configuration of Replenishment: Demand Forecast Model.
  • Fixed Reorder Qty: You use this method to replenish the stock of an item with a fixed quantity each time it falls below the reorder point. For details, see the Item Replenishment with a Fixed Quantity section below.

The system uses the specified method to calculate the quantities required to replenish the stock of the item, based on the replenishment parameters that are defined on the Replenishment tab of the Item Warehouse Details (IN204500) form.

Item Replenishment Within the Specified Quantity Range

When you select the Min./Max. method in a row of the Replenishment tab of the Stock Items (IN202500) form, you specify the following settings in the row:

  • Max Qty.: The maximum stock quantity for the item that should be at the warehouse.
  • Safety Stock: The additional stock of the item that is maintained to avoid stockouts. You should specify a safety stock value if there are fluctuations in demand and supply. Because safety stock is not used in replenishment calculation for this method, you can add the maximum quantity of the safety stock to the Max. Qty. column and the reorder point quantity to the Reorder Point column if you want to increase the reorder point to the safety stock level.
  • Reorder Point: With this method, the system uses the reorder point quantity rather than a minimum quantity. If the available stock is below this level, you should replenish your stock to avoid stockouts. You calculate a reorder point with safety stock by multiplying the daily average usage of stock by the lead time (the time when the product is being shipped from the vendor location to your company) and adding the amount of safety stock that you keep.

The Max Qty., Safety Stock, and Reorder Point settings are copied from the Stock Items form to the Item Warehouse Details (IN204500) form. For the calculation of replenishment quantity, the system uses these quantities from the Item Warehouse Details form. You can review and change these quantities before the calculation of the replenishment quantity for a stock item.

On the Prepare Replenishment (IN508000) form, the system uses the following formula to calculate the replenishment quantity in the Qty. To Process column for a stock item.

Qty. to Process = Max. Qty. - (Qty. on Hand - Qty. on Location Not Available + Qty. on Supply + (Qty. Replanned - Qty. on Demand))

The formula includes the following quantities:

  • Max. Quantity: The maximum quantity that is specified in the Max. Qty. box on the Replenishment tab (Replenishment Parameters section) of the Item Warehouse Details form.
    Note: The system uses the quantity for calculation from the Item Warehouse Details form, though these quantities are also specified for each row on the Replenishment tab of the Stock Items form.
  • Qty. on Hand: The quantity on hand, which is specified in the On Hand box (Summary area) of Inventory Allocation Details (IN402000) form.
  • Qty. on Location Not Available: The quantity on location that is not available, which is specified in the On Loc. Not Available box (Summary area) of the Inventory Allocation Details form.
  • Qty. on Supply: The quantity on supply, which is calculated based on the following plan types that are listed on the Qty by Plan Type tab (Addition table) of the Inventory Allocation Details form: Purchase Prepared, Purchase Orders, PO Receipts, In-Transit, IN Receipts, and Kit Assembly Supply.
  • Qty. Replanned: The quantity that is replanned, which is specified in the row with the stock item in the Qty. Replanned column of the table on the Prepare Replenishment form.
  • Qty. on Demand: The quantity on demand, which is calculated as follows based on the option specified in the Days of Supply box on the Replenishment tab of the Item Classes (IN201000) form for the applicable item class:
    • Hard Demand Only: The demand is calculated as Qty. SO Allocated + Qty. SO Shipped + Qty. SO Back-Ordered.

      This quantity is calculated based on the following plan types, which are listed on the Qty by Plan Type tab of the Inventory Allocation Details form (Deduction table): SO Allocated, SO Shipped, and SO Back-Ordered.

    • Item Class Settings: The demand is calculated based on the availability calculation rule specified for this item class on the General tab of the Item Classes form.

    The current stock level of a particular item is reflected by the Available Quantity setting in the Summary area of the Inventory Allocation Details form. If the system detects that this level has reached or fallen below the reorder point (which is specified in the Reorder Point box on the Item Warehouse Details form), it calculates the quantity required to replenish the item stock according to the formula for the calculation of the quantity in the Qty. To Process column on the Prepare Replenishment form.

Replenishment Calculation with the Min./Max. Method

On the Purchase Orders (PO301000) form, the quantities specified in a purchase order may differ from those specified in the corresponding replenishment requests on the Create Purchase Orders (PO505000) form. The final replenishment quantity for a stock item in a purchase order is calculated based on the settings on the Prepare Replenishment (IN508000) form for the vendor that will fulfill the replenishment, and the value in the Qty. to Process column for a table row is calculated as follows:

  • If the requested quantity is less than the minimum order quantity specified in the Min. Order Qty. box on the Vendors tab of the Stock Items (IN202500) form, the system uses the minimum order quantity.
  • If the requested quantity exceeds the maximum order quantity specified in the Max. Order Qty. box on the Vendors tab of the Stock Items form, the system uses the maximum order quantity.
  • If the requested quantity is not divisible by the lot size specified in the Lot Size box on the Vendors tab of the Stock Items form, this quantity is rounded up to the next integer, and that number of lots is ordered.

Item Replenishment with a Fixed Quantity

You specify the Fixed Reorder Qty method for an item when you want to replenish the stock of the item with a fixed quantity each time it falls below the reorder point. To use this method for the replenishment of a stock item, on the Replenishment tab of the Stock Items (IN202500) form, you select the Fixed Reorder Qty option in the Method column. Then you specify the following parameters:

  • Fixed quantity that may be either economic order quantity or economic reorder quantity:
    • If the replenishment source of the row is Purchase, we recommend that you use as the fixed quantity the economic order quantity (EOQ) determined by warehouse specialists for the item by estimating the cost of ordering the item from a particular vendor. For each vendor from which the stock item can be purchased, the EOQ setting is specified on the Vendor Inventory (PO201000) form. You can view the EOQ values specified for all vendors of the item on the Vendors tab of the Stock Items form. The EOQ quantity is equal to the specified vendor's EOQ for the stock item once this quantity determines that the available quantity reaches or is lower than the reorder point.
    • If the replenishment source of the row is Transfer, we recommend that you use the economic reorder quantity (ERQ) specified for transfers that involve this stock item. This value represents the level of inventory that minimizes the total transfer costs. The ERQ is specified in the Transfer ERQ column on the Replenishment tab of the Item Classes (IN201000) and Stock Items forms. You can override the default value of the Transfer ERQ box on the Item Warehouse Details (IN204500) form. The ERQ quantity is equal to the specified transfer ERQ for the item once this quantity determines that the available quantity reaches or is lower than the reorder point.
  • Safety stock specified on the Stock Items form in the Safety Stock column of the Replenishment tab: This is the additional stock of the item maintained to avoid stockouts. The safety stock is required if there are fluctuations in demand and supply.
  • Reorder point specified on the Stock Items form in the Reorder Point column of the Replenishment tab: For the Fixed Reorder Qty method, the reorder point is specified as the safety stock plus the quantity that may be required during the lead time.

With the Fixed Reorder Qty method, on the Prepare Replenishment (IN508000) form, the system updates the Qty. to Process setting for the stock items listed on the form. Based on this quantity, a request for replenishment (for a quantity that is equal to the specified vendor's EOQ or the transfer ERQ) can be generated through the Prepare Replenishment form.