The Order review or Review period (RP) is defined as how frequently an order schedule will be created, reviewed and downloaded to the ERP system to be actioned. Ideally one would review orders from all suppliers for all items daily, but this is not always practical or time-efficient, especially when thousands of items are involved.
The Review period - or frequency of reviewing orders - will be decided by the demand planner or their manager. Some factors to consider are:
Product importance - AH items may require more frequent review - that is, a shorter Review period, than CL items.
Supplier constraints - Certain supplier constraints, for example, a requirement to have all orders placed before the 25th of each month, may influence the Review period.
Replenishment cycle - An item’s Review period value can’t be more than its replenishment cycle (RC) value. Suppose an item has a RP of 14 days and a RC of 7 days. The RC indicates that every time we place an order, we wish to place an order for 7 days worth of stock. The RP indicates that we will create and review this order every 14 days. If this is the case, then every time we create and review an order, we would have lost out on creating an order for an entire RC’s worth. Therefore, order review can’t be less frequent than the replenishment cycle, meaning the RP value can’t be higher than the RC value.
An unfortunate scenario
Refer to Ordering levels simplified if you are unfamiliar with ordering levels.
As we know, the app will recommend an order to be placed at the point where the net stock is equal to or below the Reorder point.
When the Net stock is more than the Reorder point, no order will be recommended as there is still enough stock.
However, suppose this item has a Review period of 14 days, meaning we only check to see whether there is an order recommendation for it 2 weeks later.
Because the Net stock is below the Reorder point, the item will have a recommended order. However, we may have put off reviewing this item for too long, as the net stock has dropped very close to dipping into its safety stock. And while it has safety stock in place to protect it from stocking out, this safety stock is also likely to be depleted during the lead time required for the new order to arrive.
How can we prevent this?
One way of ensuring this does not happen is to do order review daily (RP = 1). But this is not always practical or cost effective.
Another way to prevent this is by making use of the following functions: Look forward days and/or top-up orders. These can be used individually or simultaneously and work as follows:
Look forward days
The Look forward days parameter specifies how far into the future you wish to have the App look for Orders and bring them forward to today. This is useful for dealing with supplier shut downs or Chinese New Year. It is also useful when an item has a long review period and order review happens infrequently.
A default look forward days value may be specified by supplier in the supplier screen. Refer to article Look forward days: Using and setting a default by supplier for further explanation.
Using this functionality will result in some excess stock as orders arrive before the stock is required. But in most cases this is the lesser of two evils and a bit of excess is preferred over stocking out.
WARNING: Do not use this functionality unless there is a valid reason. Simply looking forward 60 days into the future because you wish to not do order reviews for the next two months will result in a lot of excess stock. Without justification, the warehouse team and finance team will likely not be impressed by all the excess stock.
Top-up orders
Normally, the app won’t recommend an order unless the Net stock has dropped to below the Reorder level. However, using top-up functionality, you are able to order the difference required to get back up to the Order up to level. This does, however, mean not ordering a full RCs worth.
This could be very useful for filling up containers or reaching a supplier discount point. Using top-ups also means not bringing in excess stock as only the difference required to get back to the Order up to level is ordered.
WARNING: If an item has large supplier constraints, namely minimum order quantity (MOQ) or order multiple (OM), the order required to get back up to the Order up to level will be rounded to respect these supplier constraints, which may result in over-ordering and excess stock.
Refer to Placing orders easily and quickly and Using the Solver functionality for ordering for more on using these functionality.
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