The Recommended Order Quantity (ROQ) generated by the app is essential for balancing inventory. Adhering to the ROQ helps you meet model stock levels, freeing up working capital and simplifying the ordering process.
Understanding the Ordering Policy Panel
The ordering policy panel, found on the recommended order schedules for each item, provides a quick snapshot of core ordering indicators.
Let's break down the policy bar:
The green section represents the lead time.
The olive section represents the safety stock.
The purple section represents the replenishment cycle.
When you receive an order, this stock should last until the next replenishment. Therefore, you always order and receive one replenishment cycle's worth of stock at a time. The system also maintains a safety stock level to mitigate risks like supplier and demand uncertainty. Since deliveries aren't instantaneous, lead time is also factored into the order to cover stock needed while awaiting delivery.
The replenishment cycle, safety stock levels, and lead time are core components of the ordering process, collectively known as the cover forward period. The policy bar visually represents this cover forward period.
Remember, the replenishment cycle, safety stock, and lead time are all measured in days. Demand converts these days into the number of units, which is ultimately displayed as the Recommended Order Quantity.
On-Hand and On-Order Visuals
Overlaid on this policy panel are two additional bars:
The dark plum bar represents the stock on hand, showing how long it's expected to last in days.
The olive bar represents any orders, indicating how long the stock from those orders will last.
If the dark plum and olive bars overlap, it means no stockouts will occur; orders will be received before existing stock depletes.
If there's no dark plum line, there's no stock on hand, and the item is currently stocked out.
Finally, the table below lists all these key indicators in both days and units for easy reference.
This information enhances the ordering process by providing a helpful reference to ensure all inputs are correct.
You might also be interested in the following: