The materials management module maintains a list of all materials stocked, the number of units of an item currently in stock, and the re-ordering requirements for each item, including whether orders should be based on minimum/maximum or economic order quantity (EOQ). When on-hand quantities change, the system can determine which items need to be re-ordered.
The system calculates inventory re-order points and economic order quantities based on formulas. An item is selected for re-order only if the current quantity on hand equals or falls below the re-order point. You may view the suggested orders on screen and select the ones that should generate purchase orders; order quantities can be manually adjusted at this time. Upon confirmation, the system will generate purchase orders by vendor, which can then be dealt with in the Work With Purchase Orders function.
In order for the suggested orders function to work correctly, the following information should have been entered into the system:
The suggested order quantity is the economic order quantity. The EOQ is calculated by the system using the following formula: EOQ = (2 x SetUpCosts x AnnualUsageInUnits) / Carrying Costs.
The system calculates re-order points for parts based on the following formula: ReorderPoint = Demand x LeadTime + SafetyStockAtReorderTolerance.
You may request the re-order processing calculations by location (warehouse) or for all warehouses. An item is only selected if the current quantity on-hand falls below, or equals, the re-order point. The quantity on-hand is the sum of the quantity on-hand, in-transit-in quantity, and quantity on-order, less any in-transit-out quantity.
When using the min/max method, the re-order point is calculated as follows:
ReorderPoint = SeasonalMinAtReorderTolerance + Demand x LeadTime.
The order quantity is calculated as: OrderQuantity = SeasonalMax - QuantityAvailable.
Note that core items are included in suggested orders.
Back to Suggested Orders