1
Determine the Current Stock Level
Based on the WMS or inventory data, it is possible to determine how many units are currently stored for each item. If the WMS or inventory data is not maintained, an inventory should be taken to determine the current stock levels.
2
Define a Minimum Stock
The minimum stock level is the quantity of a product that must always be available in the warehouse to fullfill regular demand. In order to calculate the minimum stock level, both the delivery time for a replenishment order and the average sales have to be defined. The minimum stock level should be defined in such a way, that there is no shortage, even if an order is not placed until the minimum stock level is reached.
3
Determine a Reorder Level
The reorder level describes the stock level at which a purchase order must be triggered. It is also calculated from the lead time and the average sales volume. The minimum stock level must also be added.
4
Define the Order Quantity and Maximum Stock
The maximum stock level should never exceed the reorder level added to the order quantity optimum. The optimal order quantity depends on the prices (e.g. quantity discount) and the storage costs (e.g. price per square meter).
5
Calculate the Cost of Over/Understocking
To determine whether there are overstocks or understocks, the current stock level must now be compared with the maximum, reorder and minimum stock levels. Overstocks exist if the current stock level is above the maximum stock level. Understocks exist if the current stock level is below the minimum stock level.
A
Overstock: Determine additional space requirements and compare with current land prices
Excess stock is critical because it both costs to tie up capital and costs to store. Comparing the space required for maximum inventory with the current space required is the easiest way to determine the price of excess inventory. The price of storing additional goods can then be determined using the current price per unit area.
B
Understocking: Determine the cost of not delivering products
Understocking is critical as it can lead to delivery delays. Penalties are often incurred when a delivery is late. In addition, delivery delays usually lead to a loss of image.
-800x800.png)
-800x800.png)
