Setting the stocking indicator correctly is critical

Accurately defining your product range is critical for inventory planning

 

Read the tutorial

In this tutorial I am going to explain the possible values for the stocking indicator, highlight why setting it correctly is so critical for replenishment, and cover a few alternatives for where and how it can be maintained.

The most fundamental decision you need to make when planning your inventory is “which items are going to be kept in stock, which will only be ordered as required and which will no longer be ordered under any circumstances.”

 

Values for the stocking indicator

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Stocked items will be ordered based on all future demand streams and the intent is to supply customers from available stock.

Non-stocked items are only ever ordered when one of your customers orders it from you. They are typically slow movers that your customers can’t easily get elsewhere, and they are willing to wait for delivery.

Obsolete items will never be ordered under any circumstances. You may still have stock of them, you can still sell them but you will never purchase them.

 

Ordering: stocked items

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Stocked items can be identified by the presence of the matrix (highlighted by the green circle).

The forecasts (highlighted by the orange circle), backorders, allocations, on order (highlighted in yellow) and policy settings (highlighted in green) of this stocked item result in a recommended order quantity of 8,184 units.

 

Ordering: non-stocked items

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By changing the same item to non-stocked for illustration purposes, the 2,000 currently on order is not enough to cover outstanding customer orders and existing commitments. The order recommendation in this case is for 475 to fill the gap.

 

Ordering: obsolete items

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With the stocking indicator changed to obsolete, all backorders are ignored, and the App will never recommend an order for this item.

By this example you can see that setting the stocking indicator correctly is essential for replenishment.

 

Setting the stocking indicator “nationally”

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To illustrate the difference between setting the stocking indicator by item nationally versus by location, I will use the example of a company that has multiple locations across the country.

If I were to set the stocking indicator based on item nationally, then the item would get the same stocking indicator in every single location. This would be ideal if there was no need for an item to have a different setting in any location.

 

Setting the stocking indicator “by item by location”

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If I were to set the stocking indicator based on item and location, then the item could be stocked in some locations, non-stocked in others and obsolete where required. This would be useful if the company supplied items that were only applicable to a part of the country, such as heaters or sports branded merchandise.

 

Maintaining it in your ERP

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The decision to maintain the stocking indicator in your ERP may rely on whether your ERP has a field for this purpose, either a standard ERP field or a user-defined field. Maintaining it in your ERP still requires you to decide whether to maintain it “nationally” or “by location”.

If there is a standard ERP field, chances are that our interfaces will already be picking it up. If you want to use a user-defined field, you will need to communicate this to our implementation team so that the extracts can be modified.

 

Maintaining it in the App

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Maintaining the stocking indicator in the App is as simple as changing a setting in the configuration options, which enables a “change” button on the item enquiry.

The main advantage of maintaining it within the App is that when you notice an item has the wrong stocking indicator, you can change it immediately.

It is important to note that maintaining it within the App can only be done “by location”.

 

Additional rules that can be configured

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Additional rules can be configured within the App to further refine the stocking indicator.

Items that have already been flagged as obsolete or non-stocked, either in your ERP or in the App, will always remain as obsolete or non-stocked as they have been manually classified.

Only auto classified items will be tested against these rules. Items will be set to stocked unless they meet the criteria for non-stocked or obsolete.

The main advantage for using these rules to further refine your stocking indicator settings is that they are dynamic, applied daily and can help to reduce maintenance.

 

Summary

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And that’s it for my tutorial on the stocking indicator.

Accurately defining your product range is critical for inventory planning, as it determines:

  • How each item will be ordered

  • How each item is evaluated for excess stock, stock outs, potential stock outs and surplus orders

  • The inventory policy that will be applied to each item

  • And, ultimately, the stock holding for each item