Implementing SPOs: How Part 2

Today’s Presenters Debbie Dotson Kyle Yost Aaron Wehrly Sr. Analyst ddotson@dmsi.com Kyle Yost Customer Support Assoc. kyost@dmsi.com Aaron Wehrly Sr. Customer Support Spec. awehrly@dmsi.com Brittanie Butterfield Sr. Analyst bbutterfield@dmsi.com October 1, 2019 | 2

Services and Housekeeping Before we get started Services and Housekeeping Please set all cell phones on vibrate All SPO’s sessions besides the HOT (hands on training) class will be in this room through the next 3 days Sessions will be running at various times and not within a structured timeframe. Double check your schedules on when the next class you are going to is scheduled to start. Please fill out surveys (last page in handouts) and turn them into the front desk to receive your stickers October 1, 2019 | 3

Agenda Things to cover Reorder Calculations Running SPOs Recommended buy Concept behind the reorder point Reorder calcs Math behind reorder calcs Running SPOs Branches, product group/buyer/supplier group/supplier ABC criteria Surplus Reviewing SPOs Review supplier/branch/items Making changes Creating orders October 1, 2019 | 4

Recommended Buy Recommended Buy = Buy Point – Net Qty + EOQ (Adjusted to meet minimum packs and order quantities) Determined based on three factors Buy Point (when to buy) Order Point, Reorder Point, Minimum ROP Net Quantity (inventory position) Economic Order Quantity (how much to buy) September 10, 2015 | 5

Concept Behind Reorder Point Recommended Buy = Buy Point – Net Qty + EOQ Definition of Reorder Point (ROP) The point in time at which a PO needs to be issued to avoid using any safety stock Timing is very important to customer service and having the material when the customer needs it The three key elements of ROP Usage – amount of material sold or used in a specified time frame Lead Time – how long it takes to get material from your supplier Safety Stock – additional material for the unexpected September 10, 2015 | 6

Reorder Point Calculation Method ROP = (Daily Usage x LT) + SS Settings that affect usage How to update usage October 1, 2019 | 7

ROP = (Daily Usage x LT) + SS Settings that affect The Usage Factor ROP = (Daily Usage x LT) + SS Settings that affect Various settings control what usage is included when calculating the reorder point. History Start Date (Item Maintenance – Branch Settings) If importing, overriding or converting usage, manually set the History Start Date. October 1, 2019 | 8

Affect Usage Settings (con’t) ROP = (Daily Usage x LT) + SS Affect Usage Settings on Item (Item Maintenance – Misc Param) When selling material, using material for Reman or Work Orders, or transferring material, various settings control if that usage will be used for reordering. September 10, 2015 | 9

Affect Usage Settings (con’t) ROP = (Daily Usage x LT) + SS Level to store usage (Item Maintenance – Inv Param) DW Inventory Level September 10, 2015 | 10

Affect Usage Settings (con’t) ROP = (Daily Usage x LT) + SS Data Files > Sales Order Settings > Sale Types Use in reorder calc setting September 10, 2015 | 11

Affect Usage Settings (con’t) ROP = (Daily Usage x LT) + SS Data Files > Inventory Control > Reman Types Affect usage for inputs September 10, 2015 | 12

ROP = (Daily Usage x LT) + SS Usage Data ROP = (Daily Usage x LT) + SS Item Activity Sales order invoicing Branch transfers Work order usage Remanufacturing Credit memos Data Warehouse Data used for reorder calcs September 10, 2015 | 13

View/Update Usage (icon) How to update Stock Status View/Update Usage (icon) How to update September 10, 2015 | 14

View/Update Usage How to update Stock Status View/Update Usage How to update September 10, 2015 | 15

View/Update Usage How to update Stock Status View/Update Usage How to update September 10, 2015 | 16

ROP = (Daily Usage x LT) + SS Usage Import/Export ROP = (Daily Usage x LT) + SS September 10, 2015 | 17

Usage Import/Export (con’t) September 10, 2015 | 18

ROP = (Daily Usage x LT) + SS Lead Times ROP = (Daily Usage x LT) + SS The next factor in determining the ROP is an item’s lead time Lead Time = How long it takes to receive material once it’s ordered This plays an important role in how much inventory you carry You have the option to manually set your lead times or not have certain receivings affect the lead time (e.g. for special buys) Stored in Item Maintenance > Item Supplier September 10, 2015 | 19

ROP = (Daily Usage x LT) + SS Safety Stock ROP = (Daily Usage x LT) + SS Last element in the ROP calculation Used to account for unexpected usage or delivery delays Determined based on Usage, Lead Time, and Delivery Delay Factor Usage during Lead Time (Lead Time Demand) Deliver Delay Factor (Lead Time Variability) Safety Stock = Daily Usage x .7 x Delivery Delay Daily Usage = Usage x Lead Time / 30 .7 = statistical constant that covers unexpected high usage Delivery Delay = Worst Lead Time – Average Lead Time Average Lead Time September 10, 2015 | 20

Recommended Buy = Buy Point – Net Qty + EOQ Net Quantity Recommended Buy = Buy Point – Net Qty + EOQ Net Quantity (inventory position) (On Hand – Committed + On Order – Backorders) October 1, 2019 | 21

Recommended Buy = Buy Point – Net Qty + EOQ EOQ = square root of [(24 * TAU * Purchasing Cost) / (Carrying Cost Factor * Cost)] TAU (Trend Adjusted Usage) Purchasing Cost, Carrying Cost Cost (average cost) October 1, 2019 | 22

Running Reorder Calculations Purchasing > Reorder Calculations Run once per month Save criteria Run through Automated Processing October 1, 2019 | 23

Backward Method October 1, 2019 | 24

Forward Method without Trend October 1, 2019 | 25

Forward Method with Trend October 1, 2019 | 26

What Agility calculates Reorder Calculations What Agility calculates

The Reorder Point Model Mathematically expressed: ROP = (Daily Usage x LT) + SS Initial Qty Received P.O. Placement Occurrence 1 2 3 4 5 6 157 112 90 67 45 EOQ Reorder Point Max Avg Inventory Level (Safety Stock + EOQ) Quantity in Units Target Avg Inventory (Safety Stock + 1/2 EOQ) Safety Stock LEAD TIME 2 4 5 7 9 11 13 15 Weeks September 10, 2015 | 28

SPO Calculation Worksheet

Reorder Calculations Examples of usage, lead times, Inventory position, and EOQ parameters October 1, 2019 | 30

Reorder Calculations Backward Calculation

Forward Calculation (No trending) Reorder Calculations Forward Calculation (No trending)

Forward Calculation with Trend Reorder Calculations Forward Calculation with Trend

Running SPOs Stock, special orders, both Run SPOs for branch(es) Criteria based on Product Group/Supplier Group/Buyer-make multiple selections Supplier-one or range of suppliers Items to Include All A, B, C, D within product line/buyer/supplier group Calculate surplus If yes, choose branch(es) Other options Save criteria October 1, 2019 | 34

Reviewing SPOs SPO header info SPO detail info Create orders Review SPO by supplier Review by branch Review order totals SPO detail info Review items Usage Info, reorder calc info, surplus info Make changes Quantities to order, costs, add and remove items Exit to SPO header Create orders New order, append to existing Review PO, send to supplier October 1, 2019 | 35

Here’s what to do when you get back to work… Action Plan Here’s what to do when you get back to work… Review sale type and reman types for affect usage Review Item Setup making necessary corrections Usage, Lead Times, History Start Date, Affect Usage History flags Understand reorder point calcs and have plan for how to calculate all product lines Run reorder calculations monthly Run suggested POs regularly Review SPOs and place purchase orders Use suggested purchasing! Contact Agility Support for follow-up questions October 1, 2019 | 36

Thank You For Attending Please fill out your surveys. Presenter A Presenter B Presenter C Presenter D Kyle Yost Customer Support Associate kyost@dmsi.com Debbie Dotson Sr. Analyst ddotson@dmsi.com Aaron Wehrly Sr. Customer Support Specialist awehrly@dmsi.com Brittanie Butterfield Sr. Analyst bbutterfield@dmsi.com October 1, 2019 | 37