Quick Summary: Accurate purchase order history is essential for calculating supplier lead times and supply risk. Understand why certain records are excluded during import to prevent distorted data from affecting safety stock recommendations.
Why Purchase Order History Matters
Importing purchase order history into the app enables us to:
Calculate lead time
This is the time that lapsed between the date that a purchase order was created in the ERP and the date that a receipt was generated for that inventory.
Lead time in the app indicates how long stock takes to arrive from the supplier once an order is placed.
Analyse variability in lead time
The app measures how consistent the supplier is in meeting that lead time and how often there are delays or deviations.
This becomes a measurement of supplier reliability or Supplier Risk and is used to determine the need for safety stock.
Calculate lead time automatically
If lead time is not stored in your ERP, the app can calculate it based on historical data.
It can also measure how often the lead time is consistent, or how often the supplier deviates from it.
➜ For exclusions to the imported data set, see Purchase Order Data Exclusions Explained
➜ For methods of setting lead time, see How To: Set Lead Time (Options)
Supplier Risk vs Supplier Offset
The app considers three inbound performance measurements when determining how much safety stock to hold.
Measurement 1: Lead Time
Once the length of the lead time is known, either stated per item, per supplier or calculated from history, it becomes one of the inputs into the safety stock calculation.
Short lead time means stock arrives faster, so less safety stock is required
Long lead time means slower replenishment, which often requires more safety stock
Measurement 2: Supplier Risk
Supplier risk considers how often a supplier delivers late or short supplies an order.
If a supplier delivers late or supplies less than the quantity ordered, stockout risk increases. The app measures the spread of late deliveries and short supplies and assigns the safety stock required to protect against that variability.
Important reminder:
Risk calculates the initial amount of safety stock.
This covers known lead time and the likelihood of late or short supply events.
To reach the final safety stock value, we must consider the third measurement.
Measurement 3: Supplier Offset (Positive or Negative)
Risk considers late and short supply only.
Offset considers late, early, over and under deliveries. This is referred to as delivery bias.
The app calculates the average actual lead time compared to the planning lead time. It then makes a positive or negative adjustment to safety stock depending on whether the supplier usually performs slower or faster than planned.
Supplier delivers late
Safety stock increases and Offset Days are positive
Supplier delivers early
Safety stock decreases and Offset Days are negative
The same logic applies to received quantity:
If the supplier often short supplies, safety stock increases with a positive offset
If the supplier often over supplies, safety stock decreases with a negative offset
Final Outcome
Even if you are planning using the stated lead time, the app adjusts your safety stock based on historical delivery behaviour.
This means that:
Lead time determines when you place purchase orders
Supplier Risk and Supplier Offset determine how much safety stock you hold
The app uses history to protect against stockouts or excess more accurately
Take Action
Navigate to System > Data Quality screen > Purchase Orders panel to view these exclusions and take corrective action in your ERP.
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