IN THIS ARTICLE

  • Forecasting & optimization: Overview
  • Components of Forecasting & optimization

Forecasting & optimization: Overview


The setting in this section govern if the following have to be calculated and displayed for the inventory items:

  • Demand forecast
  • Optimal Order quantity


Components of Forecasting & optimization

  • Demand forecast: The forecasted demand computations are enabled by this setting. Forecasted Demand for a given inventory item is the demand or consumption expected in the next order period for that item. Default values can be specified for the window for historical data availability, order periodicity and the number of order periods to look back (for computing demand for the next order period). The following details will have to be provided for the calculation:
    • Minimum transaction period
    • Maximum transaction period
    • Order periodicity (average) 
    • Number of order periods to look back period
  • Optimal order quantity: The Optimal Order Quantity is the recommended quantity of stock to order, that is considered the most optimal as determined by the system.These settings enable and govern the computation of optimal order quantities based on the inventory optimization model. The following details will have to be provided for the calculation:
    • Inventory Model
      • User specified replenishment - s,X: This policy indicates the user has pre-defined reorder points for each material-entity combination. When the inventory level falls below the reorder point, they replenish by the quantity of their choice. This is when the enterprise does not want to follow a policy or when there are several qualitative variables in determining what to 
      • System determined replenishment - s,Q: This is continuous review system where a fixed quantity Q is ordered whenever the inventory position drops ro the reorder point s, or lower.
    • Minimum transaction period
    • Maximum transaction period
    • Order periodicity (average) 
    • Number of order periods to look back period
    • Delivery lead time (average)