EOQ & ROP Calculation

Ranking Table

• Product Ranking Table for Corporate and by Branch including required Turns and Safety Stock Factor based on Annual Sales Dollars or Units.
• Use of dollars or units determined by billing parameter setting.

Purchasing Parameters

• Default Timer for new product added
• Weeks Active
• Number of Weeks with Activity
• Weighting Weeks
• EOQ and ROP rounding
• ROP and EOQ corporate or store
• Use Demand Smoothing
• Internal Review
• ROP/EOQ Use – DC or Corporate
• Branch Replenishment from DC – B/S/N

Ranking Calculation

• Ranking calculated based on Unit Sales or Dollar Sales according to Billing Parameter setting screen 4 – Sales Rank Basis (U/$)
• Run once for all locations
• Calculate Active Weeks from first receipt date to current date
• Ignore items without a first receipt date
• Calculate sales value by week for weighting weeks using invoice costing based on billing parameter setting, screen 2 invoice costing Average or Last (P6)
• Sum these values and the rank will set when the total sales value is less than the next value in the rank parameters.
• The sum of the sales value for all branches is used to calculate the corporate sales rank

Calculate EOQ Values

• This is done for each branch separately
• Age Week Sales
• If Reorder Allowed = N, S or K do nothing
• If Reorder Lock not 0 do nothing
• Calculate the Active Weeks
• Only done for products that have a first receipt date
• Active weeks from First Receipt to current
• If the Active Weeks is > Weeks Active parameter use the parameter value
• If the Active Weeks is 0 do nothing
• Calculate Annual Unit Sales = previous 52 weeks sales.
• If Active weeks is < 52 calculate annual units as sum of previous 52 weeks * 52 / Active Weeks.
• Weeks with Activity = Weeks in Active Weeks that have sales not = 0
• If Weeks with Activity < Number of Weeks with Activity move zero to Vendor and Transfer EOQ
• Assign the EOQ
• Based on the ranking parameter for the part divide the annual unit sales by the turns parameter giving the EOQ Vendor and Transfer.

Calculate Lead Time by Part

• Use the number of receiving’s set on the supplier record. If blank or 0 then default of 8 is used
• Calculate the average lead time for the most recent number receiving’s of the part.
• Compare the average lead time to the highest number of days and add the lower of the difference or 25% of the average lead time.

Calculate ROP Values

• Use DC lead time from branch record.
• If Lock value = 99 do nothing
• Does not use RANK-CUTOFF value
• Reduce the lock value by 1
• Calculate active weeks from first receipt date to current date
• Sum the sales units for the Weighting weeks.
• Compute the daily sales = total sales by week / (weighting weeks * 6). It was decided early on that only 6 business days per week should be used for the daily sales calculation.
• Using the sales ranking and lead time for the part calculate the Vendor ROP. Daily Sales * (Lead Time + Internal Review Time). Round this value based on Purchasing Paramenter settings. Add safety stock percentage and round again.
• Calculate the DC ROP value as Daily Sales * DC Lead Time, then round based on purchasing parameter setting. Add safety stock percentage and round again.

Calculate Corporate Values

• Add the Vendor EOQ for all locations and put the total as the Corporate EOQ
• Add the Vendor ROP for all locations and put the total as the Corporate ROP

Daily Suggested Order

• The daily suggested order calculation can be based the DC or Corporate ROP/EOQ
• Recalculates for all parts each day with the exception of parts on outstanding suggested orders where the order quantity has been modified and not ordered yet.
• Suggested order will buy direct to branch based on supplier setting
• Do not order product set as N for reorder allowed unless there is a customer backorder.
• DC available quantity for replenishment to branches calculated based parameter Branch Replenishment from DC.
• Transfers it the quantity available is equal to or less than the ROP DC order the DC EOQ – Qty Available + ROP DC base on DC Available Quantity. Use branch purchase quantity for transfers
• Corporate Vendor Orders compare the DC available quantity to the Corporate ROP and order when the available is less that the corporate ROP