The recommended order quantity generated by the app for each inventory item is essential for balancing inventory. If followed correctly, inventory will meet the required model stock levels, translating into freed up working capital - and a reduction in ordering headaches!

Vital to this process is the ordering policy panel, providing a snapshot of core indicators, useful at the time of order. This panel can be found on the recommended order schedules for each ordering item.

Let’s start with the policy bar. The bar is composed of a green section, (representing the lead time), an olive section (representing the safety stock) and a blue section, (representing the replenishment cycle):

When we receive any order, we know that this stock should last up until the next replenishment - that means, we always want to have one replenishment cycle worth of stock delivered to us at a time, and therefore, one replenishment cycle of stock is always ordered.

We also know that the system will keep a certain level of safety stock for us at any given time, to mitigate the risks associated with ideas like supplier and demand uncertainty.

However, deliveries of stock aren’t (unfortunately!) instantaneous. It’s very unlikely that we will order and receive the stock the same day. This means that we also have to keep additional stock to cover us while we expect the delivery - hence why the lead time is also considered in the order.

The replenishment cycle, safety stock levels and lead time are therefore a core component of the ordering process, and are referred to as the cover forward period. The policy bar represents this cover forward period. For more information on the cover forward period, see here.

Remember, the replenishment cycle, safety stock and lead time are all in days. The demand is used to convert these days into the number of units. The number of units is what is ultimately displayed as the recommended order quantity.

Overlaid on this policy panel are two bars, one red and one black:

The black bar represents the stock on hand. This lets us know that we still have stock - and shows how long it should last in days. The red bar represents any orders, and how long the stock in that order will last for.

If the black and red bars overlap, then it means that no stockouts will occur - orders will be received before existing stock depletes:

If there is no black line, there is no stock on hand, and the item can be considered as being stocked out currently:

Finally, all of these key indicators are listed - in days and units - in the table below, for easy reference:

This information can therefore be used to enhance the ordering process, providing a useful reference point to ensure that all inputs into the ordering process are correct.

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