Replenishing Child Branches

The Suggest P/O program has two different ways of determining when a parent branch needs to make a purchase to meet a child branch's needs. The method used depends on the parent branch's lead time and the child branch's Transfer Cycle Days.

The other calculation that is prevalent throughout the Purchasing process is the projected inventory level or PIL. The PIL is the quantity of a product used for predicting purchasing needs. The amount you physically have on hand, minus the amount committed to orders, plus the amount coming in on transfers and purchase orders. Each product has its own projected inventory level.

PIL = ((on hand committed) + on transfer + on purchase order)

Note: If the Exclude SOE Returns From PIL Check control maintenance record is set to Yes, then return items on a sales order will be excluded from the PIL check at the time of order status change on the Status screen.

This section describes two examples each showing one of the methods:

• If the parent branch's lead time is less than the child branch's transfer cycle days, then to meet the child branch's needs the parent branch must purchase enough to meet the child branch's transfer cycle days.

• If the parent branch's lead time is greater than the child branch's transfer cycle days, then to meet the child branch's needs the parent branch must purchase enough to meet the parent branch's lead time requirements.

Regardless of the method used, the Suggest P/O program uses two constants: the child branch's demand and the child branch's hit-related safety coefficient (HRSC).

The normal surplus point calculation is as follows:

Line Point (LP) plus the Economic Order Quantity (EOQ) all rounded to package quantity minus the projected inventory level (PIL).

Abbreviated: ((LP + EOQ) rounded to package quantity) - PIL

The surplus point calculation for the parent in a grandparent/parent/child warehouse scheme is as follows:

Parent Surplus Point = ((Lead Time plus Cycle Days plus Safety Days (LCS) of grandparent )multiplied by the Combined Demand per Day (DMD.day) of parent and any child branches) plus Economic Order Quantity (EOQ) of parent and any child branches.

Abbreviated: (LCS x DMD.day) + EOQ

Replenishment Example 1

In the following example, assume that the parent branch's projected inventory level equals the order point.

BR#1:   PIL = OP

In other words, the parent branch has nothing to spare, but also has no needs. The only thing the Suggest P/O program needs to determine in the example is how much to buy for the child branch.

Premise: When the parent branch's lead time is less than the child branch's transfer cycle days, to meet the child branch's needs the parent branch has to buy enough to meet the child branch's transfer cycle days.

The transfer cycle days of the child branch is 90. This number exceeds the parent branch, which is 30. The child branch's short quantity trigger is based on its transfer point. The parent's lead time is not used because the child branch's need is more.

Replenishment Example 2

In the following example, assume that the parent branch's projected inventory level equals the order point.

BR#1:   PIL = OP

In other words, the parent branch has nothing to spare, but also has no needs. The only thing the Suggest P/O program needs to determine in the example is how much to buy for the child branch.

Premise: If the parent branch's lead time is greater than the child branch's transfer cycle days, then to meet the child branch's needs the parent branch must purchase enough to meet the parent branch's lead time requirements.

The parent branch's lead time is 30. This lead time is greater than the child branches transfer cycle days, which is 14. The parent branch's lead time is used to establish the child branch's order point, which is then used to calculate the amount to buy.

Parent branch's lead time is multiplied by the child branch's demand per day. The result is added to the child branch's safety stock multiplied by the child branch's demand per day. This is equal to the child branch's order point, as shown below:

(30 x 0.751) + (19 x 0.751) = 37

Child branch's order point minus the child branch's PIL equals the amount the parent branch needs to purchase.

See Also:

How Eclipse Calculates Line Point Safety Days

How Eclipse Calculates Order Point Safety Days

Purchasing Processes