Inventory EOQ ROL Record
You use Inventory EOQ ROL (economic order quantity re-order level) records to specify an order quantity that minimizes the total holding and order costs. They take into account the cost to hold the item versus the cost to the business if the item is out of stock.
There are several types of strategy records available in CCH Tagetik Supply Chain Planning.
See Strategy Record.
Inventory EOQ ROL records can contain some or all of the following sections:
- Bill of Materials section
See BOM Part Record in Classic Mode. - Inventory EOQ ROL section
Inventory EOQ ROL section
The top block of properties in the EOQ ROL section contains overrides; they take precedence over the lower set of properties.
EOQ ROL Section of a Record
While overrides take precedence, you can keep numbers in the lower block of properties for future use (these are ignored if override values are set). Overrides are useful if you do not have some of the information required in the lower block of properties. For example, if you provide a Fill rate override and an Order quantity override, you would not need to provide values for fields marked with a 1 or 2 in the middle block of properties.
If you have an equal split between Safety stock override and Order quantity override (30 days/60 days), you could create a new Strategy record with these parameters.
Note: Some fields may already contain values, such as Lead Time. Administrators configure these values for each record. Typically, they do not need to be changed. Power users and administrators may view, add, or edit property values in the Setup screen.
Warning: Edit Strategy records with care since any change you make to a Strategy record affects every record to which it is applied.
Following are details about the override properties.
EOQ ROL Strategy Override Properties
| Override Property | Description | Values Allowed |
|---|---|---|
| Fill rate override | To determine a fill rate to target, compare the cost of overage (too much inventory) versus underage (cost of stockout). Start with a safer strategy and make adjustments as you get more historical data. If the Fill rate override is set to 99%, then over the course of time, you will fill 99 orders and backorder 1 out of 100 orders received. For items with sporadic demand, a 95% fill rate might seem reasonable, but your calculations may be off since you have less historical data points. For example, a single spike in sales affects the calculation and may lead to a high safety stock level to cover a potential spike in the future. You can cut a sales spike from the item's history to adjust. This is why it best to begin with a safe strategy and make adjustments along the way. Any contractual requirements you may have should be set as a Fill rate override. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Safety stock override | You would typically use a safety stock override only if the value should be zero (0). You can also specify a safety stock in terms of days (30 days worth of inventory, for example) to always cover X days' worth of future demand. When you specify in terms of days, CCH Tagetik Supply Chain Planning breaks down the demand forecast into a daily number, then calculates how much stock is needed based on the daily demand forecast and when future orders are arriving. The breakdown from month to daily demand is an even distribution across the days within a month. Safety stock is determined using standard calculations, with some exceptions like accounting for seasonality, uncertainty of demand, etc. CCH Tagetik Supply Chain Planning calculates this daily based on the fill rate and forecast uncertainty. | - Fixed value (14, for example) - Xdays (7days, for example) - Field Property name (pre-populated) |
| Safety stock minimum | The safety stock will never go lower than the value entered in this field. | Whole number |
| Order quantity override | Increments of units to place orders in: days of demand beginning at order date plus lead time. Set at 60 days, for example, to place an order every other month. | - Fixed value (14, for example) - Xdays (7 days, for example) - Field Property name (pre-populated) |
| Maximum inventory | Maximum number of days' worth of inventory you want to keep on hand. For example, if you set this to 60 days, the maximum inventory on hand covers 60 days of forecasted demand. | Fixed value (6, for example) |
The remaining properties provide auto optimization of your inventory.
EOQ ROL Optimization
To optimize profits, you must balance the cost of carried inventory versus the cost of a stockout.
Following are details about the remaining properties.
EOQ ROL Properties
| Property | Description | Values Allowed |
|---|---|---|
| Item selling price | Net selling price of the item; calculated using item record fields. For example, Unit_$ASP pulls data from the ASP field of records for calculation purposes. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Item purchase cost | Average price paid for the item; calculated using item record fields. For example, Unit_$COGS pulls data from the COGS field of records for calculation purposes. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Inventory carrying cost | Percent of the cost of the item per year (for example, capital, insurance costs, risk of spoilage, and warehouse space). | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Cost to process an order | Includes all costs to process an order (for example, creating a purchase order, sending it to the supplier, fixed shipping costs, and receiving costs). | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Probability of lost sale if stockout | Stockout costs $X. Keep in mind the intangible losses of a stockout, such as loss of good will. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Order lead time | Number of days between placing and receiving an order. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Lead time stdev | Days of lead time uncertainty. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Minimum order quantity | Lowest quantity of a certain product a supplier is willing to sell. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Ship pack quantity | The smallest package the supplier is willing to ship. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| On hand | Total number of units in possession. | - Fixed value (14, for example) - Field Property name (pre-populated) |
| On order | Number of units on order (not yet on hand). | - Fixed value (14, for example) - Field Property name (pre-populated) |
| Demand profile | Continuity of the demand of the item; values are: - Continuous: Orders come in on a daily basis. - Weekday: Orders are only placed on weekdays. | - Continuous - Weekday |
| Production calendar | The production calendar(s) allows you to enter non-working days (holidays and vacation days) that affect your overall schedule or affect a specific item. See Production Calendar. | Select a calendar |
| Production setup time | Number of days needed for production setup. For example, a factory requires 6 hours to switch over factory equipment to begin a new round of products. | Whole Number |
| Transit time | Number of days needed to transport a product. For example, if an item is made on the opposite side of the country and has to be transported by train, it requires an extra 3 days to transport the item. | Whole Number |
| Max order pull-forward | This is the maximum number of days needed to pull an entire order. Ideally, this field is used for BOM resource record. The BOM resource record can pull up orders to resolve capacity constraints. The orders that are moved up have an * in the order schedule. The Max order pull-forward is used to put a limit on how many days an order can be pulled up. For example, the system to solve a capacity constraint might end up moving an order a year up which will cause excess inventory. This option keeps in check how much the BOM resource pulls up an order to solve a capacity constraint. | Whole Number |
| Floating arrival dates | The amount of time that a task in a project network can be delayed without causing a delay to subsequent tasks. Ideally, this field is used when moving up an order the system. This option allows the system to move up the whole order so order date and arrival date both move up when this box is checked. | When checked, this value allows floating arrival dates |
| Optimize capacity | Allows the software to optimize capacity by allowing the BOM resource record to pull orders up automatically to resolve capacity constraints. For example, if a full pallet is wanted to get the best price on shipping, then you would want to optimize capacity. If this box is not checked, then the BOM resource can only highlight capacity constraints but not resolve it. | When checked, this value allows the system to optimize capacity |