Welcome to Demand Driven Technologies, the home of Replenishment plus and module 5 of our education tutorials Understanding the R+ Available Stock Calculation This module is intended to provide a basic understanding of how R+ determines and uses Available Stock to trigger order recommendations in R+ and the quantity to make or purchase. In this module we will review the R+ definitions for each of the available stock components including: On hand inventory Open supply orders Issues to Work in Progress, when used Qualified demand including both the types of demand and due date definitions Demand qualifying filters that include both a future date horizons and order spike thresholds for inclusion in available stock It is necessary for planners and buyers to understand the components of the available stock calculation and it is your responsibility to ensure your data base and system settings are set to give a good signal to execute from. The R+ available stock definition differs from traditional ERP available stock definitions. Traditional ERP does NOT include any qualification of demand in its available stock calculation. The R+ available stock calculation answers the questions: When should we order? And How much should we order? The supply generation in R+ is based on what zone the available stock calculation places the part. The starting point is on hand inventory indicated by the white arrow and the yellow circle. The available stock quantity is indicated by the yellow arrow and the red circle. The difference between the on hand and available stock is made up of the demand and supply components of the available stock calculation in R+. The basic available stock definition in R+ is: open supply orders 1
Plus On hand inventory quantity, Less qualified demand. Equaling Available stock In some environments parts issued to work in progress are included as available stock. In our training database the available stock component Issued to WIP is not applicable. This is true for the majority of environments. We will discuss this later. On hand represents the quantity of inventory available and ready for release to shop floor orders. parts that are being held for quality control reasons are normally excluded from the on hand stock since by definition, these parts are not yet available for release to the shop. The definition of on order for purchase parts is all open purchase orders and open requisitions. Open requisitions includes temporary supply orders that have been created and approved in R+ but have not yet been updated through your host ERP system. Any open supply in a Planned order status that was generated using you host system MRP forecast is specifically excluded from the R+ available stock calculation. Before going live with R we always recommend turning off planned supply order generation in your host ERP system. R+ is intended to be the exclusive source of order supply generation for replenished parts. When reviewing your own parts later on in this training, be certain there are no MRP generated planned orders in the R+ Parts Activity screen. The 3 rd component of the available stock calculation is Issued to Work in Progress or Issued to WIP. Issued to WIP only applies where raw materials are actually issued to a WIP status and are than offset against open work order demand allocations until the work order is closed. Whether or not this component of the available stock calculation applies in your environment is dependent upon your particular Host ERP settings and work procedure. If your system back flushes raw materials at the first routing operation, then parts are relieved from inventory at this point and the available stock component for Issued to WIP would not apply. If you are unsure of your host system settings any further questions should be directed to your project manager or systems administrator. 2
The final component of the R+ available stock calculation is qualified demand. It is the definition of qualified demand that separates the R+ available stock definition from traditional MRP definitions. All demands falling within the qualification requirements for R+ are netted against the available stock calculation. Before we look at how R+ qualifies demand let s first understand the three possible sources of demand. There are 3 different types of demand records and they are: 1. Customer sales orders 2. Intercompany or internal transfer orders and 3. Work order demand allocations Work order demand allocations are what are known as dependent demand. This is demand created from the requirements of a parent work order. Demand allocations are created each time material requirements or Distribution requirements planning is run. R+ uses the due date for the demand order to qualify demand for the R+ available stock calculation for each of the three demand types: For customer sales orders R+ uses the ship date committed to the customer as the due date for the demand order. For intercompany transfer orders the requested date from the sister location for the transfer order due date is used. For work order demand allocations R+ uses the start date for the parent work order as the due date for the demand allocation against a child part. Customer sales orders will be referenced with the sales order number from your Host ERP system. The transfer order number from your Host ERP system is used for intercompany transfer orders. The work order allocation number from your Host ERP system is used for work order demand allocations. Most ERP systems use the work order number for the parent as the child part demand allocation reference number. 3
The next step is to understand how R+ qualifies demand for the available stock calculation. R+ uses two criteria to qualify demand for inclusion in the available stock: 1. The first filter for inclusion is the demand due date horizon. a. Demand records are qualified for inclusion if they are inside the time horizon specified in the program settings in R+. We will review these due date settings shortly when we walk through the R+ program settings. 2. The second filter for demand inclusion is qualified Order Spikes. a. The threshold for qualifying demand as an order spike is expressed as a percent of the buffer red zone. b. Order spikes are qualified when they fall inside the R+ demand horizon. The future time horizon setting is expressed as a percent of the part lead time. Both of the order spike qualification settings are maintained in the buffer profiles screen and were demonstrated in Module 2 Confirming Buffer Profiles. This is a graphical representation of qualified demand and shows both the order spike threshold and the order spike horizon. Order Spikes are orders for a single day that exceed the pre defined order spike threshold and fall inside the specified time horizon. The specified time horizon for order spike inclusion is usually set to 100% of the lead time of the part. Now that you understand the components of the available stock calculation it is time to show you where to review the program settings that determine the criteria for the available stock calculation. Remember, these program settings are system wide and are maintained only by your Systems Administrator. You will need to understand how your R+ data base settings determine your available stock calculation. We will walk through the program settings using our test data base. Begin by selecting Tools from the R+ Home Screen and then the tab Program Settings, next select the tab Replenishment. 4
Available Stock Calculation for Buffered Parts We will start with the section called Available Stock Calculation for Buffered Parts. It is the second section in your Replenishment tab display. Note, there are separate settings for work order demand allocations and customer sales orders. Starting with work order demand allocations let s review each of the settings for demand qualification based on due date: 1. The first settings determines if we ONLY include current and past due Work order demand allocations in the available stock calculation. Current demand is due today. Past due demand is any demand record with a due date prior to today or essentially a due date in the past. This 5
is the default setting for R+ because future demand is generally disregarded in a demand pull system. 2. The next setting is an option to extend the demand horizon out in time to include current, past due and future allocations over a user specified number of days. Some R+ users choose this feature to provide some added flexibility for the aggregation of orders by vendor. The usual time horizon extension is 1 to 2 days. 3. The third setting, do not include work order demand allocations should be used only when unfulfilled demand records are to be ignored and only actual pull is considered in the available stock calculation. An example in this category would be an Internet based retail supplier where demand is based only on actual pull. 4. The last setting is a checkbox for establishing whether or not qualified R+ order spikes are included in the available stock calculation. If unchecked then the order spike demands will be displayed but would be excluded from the available stock calculation. The default setting is to include order spikes in the available stock calculation and our training database is set to include order spikes. The same four demand settings are also available for sales orders and are normally set the same as the work order demand allocation settings. Order Spike Definition 6
The next program setting is the Order Spike Definition. It is displayed at the top of the replenishment tab. There are 2 components used by R+ to qualify order spikes. The first is the future time horizon R+ will use to qualify order spikes. It is expressed as a function of the part lead time. This factor is maintained in the program setting Order Spike Definition. Your data base has been set to the default value of 1.0. This represents 100% of the part lead time. This means as soon as a qualified order spike moves inside of the full part lead time, R+ will include it in the available stock calculation. Order Spike Threshold The second component of the order spike definition is the threshold used to define what quantity will qualify as a spike. This threshold is expressed as a percent of the buffer red zone and is set in the buffer profiles screen. We have chosen part PPJ with the buffer profile of B10M for our review. Edit/Buffer Profiles/B10M Select Edit from the toolbar and then click on Buffer Profiles. Locate B10M and double click to display B10M s attributes. The profile Order Spike Alert Level is set at 50% of the Top of the Red zone. The order spike for a part with profile B10M would be any single order, or a combination of orders for a single day where the order quantity exceeds 50% of the Top of the Red zone. Using the FIND feature we can locate part PPJ and review this part s buffer levels by selecting Part Properties and then Buffer Sizing. As you can see the Top of the Red is 30 parts. With B10M s order 7
spike threshold of 50% that means any single order or a total day s orders that is greater than or equal to 15 parts will be considered an order spike. After completing this module you should understand: Available stock calculation is equal to on hand plus issues to WIP (when used) plus on order minus demand (past due, due today and qualified spikes) The R+ definitions for: On hand inventory Open supply orders Issues to Work in Progress, when used Qualified demand including both types of demand and due date definitions Demand qualifying filters that include both a future date horizons and or der spike thresholds for inclusion in available stock Power point slide summary and Homework You have homework to finish before you continue onto module 6. Your homework is: Review both the program settings for demand qualification and order spike qualification in your R+ application. Make certain that you have a solid understanding of the basic components of the available stock calculation your organization is using. Make note of any questions you might have regarding your system settings. Direct any questions on your system settings to either your Project Manager or your Systems Administrator. You may want to print a copy of this module to help you step through your program settings review. Refer to this module as often as needed as you proceed through the later training tutorials. 8