# User Guide

**1. General Information**

**2. Starting Up**

**3. Connecting data**

**4. Demand and Sales Forecasting**

**5. Inventory Planning**

**6. Reference**

**1. General Information**

**2. Starting Up**

**3. Connecting data**

**4. Demand and Sales Forecasting**

**5. Inventory Planning**

**6. Reference**

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ordering-plan-calculation-general

The formulas below refer to calculation an ordering plan for planning items that are not distributed in DCs. In other words, demand for these planning items is generated by selling activity, not distribution. Ordering plan calculation for planning items that are distributed is described in the Two-echelon planning article.

To calculate the first planned order, Streamline uses the following Excel-like formula:

**Order qty _{1}** = MAX(CEILING(MAX(0,

where:

*D*– the demand forecast during the_{OC}**Order cycle**coming after the**Lead time**.

*D*– the demand forecast for the_{LT}**Lead time**period.

*Qty_to_ship*and_{LT,OC}*Qty_to_receive*– the quantities that are to be shipped and received correspondingly within the_{LT,OC}**Lead time**plus**Order cycle**period. Those can be viewed in the In transition details dialog.

**On hand**,**Order cycle**,**Lead time**,**Rounding**,**Min lot**– replenishment parameters shown in the Inventory planning tab.

The calculated **Order qty _{1}** is shown in the Qty column of the

To calculate replenishment orders for the next order cycles, the following Excel-like formula is used:

**Order qty _{i}** = MAX(CEILING(MAX(0,

`i = 2,…`

, (2)
where:

*D(OC*– the demand during_{i})`i`

-th**Order cycle**period.

*Safety stock*– the calculated safety stock for_{i}`i`

-th**Order cycle**period.

*Qty_to_ship(OC*and_{i})*Qty_to_receive(OC*– the amounts of inventory that are to be shipped and received correspondingly within_{i})`i`

-th**Order cycle**period.

*Remaining*– the remaining on-hand at the end of the previous_{i-1}**Order cycle**period.

To demonstrate how Streamline calculates an ordering plan, we will use the built-in example **Inventory Planning by Month**. We have slightly changed the input data of the project:

- added a customer order that is to be shipped on
**Jan 4 of 2019**; - added a line into the
**To receive**worksheet of the Excel document used as the data source for this example (see figure below); - changed the default
**Lead time**to**10**days for item**B05465-R**(see figure below); and - set Streamline to take safety stock as demand for the future month.

As we mentioned above, an ordering plan is calculated in two steps. First, the current order quantity is computed.

To figure out how the current order of **96** units is obtained, we will address the Explain inventory calculation dialog. To open it, we set the cursor at
item **B05465-R** and press **Ctrl + E** (see figure below).

As **Lead time** = **10 days** that ends up on **Dec 12, 2018** and the **Order cycle** is **1 month**, we take the **Subperiod consumption demand** starting from the end of **Dec 12, 2018** to the end of **Jan 12, 2019**. Since the dialog shows the dates the particular subperiod ends, we take the sum for the four subperiods staring from **Dec 31, 2018**.

- Thus,
*D*= 125 + 3 + 10 + 24 = 162._{OC}

*D*= Demand_forecast_for_period *_{LT}**Lead time, days**/ 30 = 197 * 10 / 30 = 66. This value is shown in the**Subperiod consumption**row on the date when the first Streamline's planned order arrives.

*Qty to ship*= 30, as we have a shipment of 30 units that hit this interval (see figure above).

**Rounding**= 12,**Min lot**= 60,**On hand**= 266.

Now, let's replace the parameters with the values:

**Order qty _{1}** = MAX(CEILING(MAX(0, 162 + 94 + 30 - 200), 12), 60) = 96,

We highlighted the values that are used in the calculation of the **Current order** quantity with positive and negative signs via green and red borders correspondingly in the figure above.

The values for all of the parameters in the formula (2) can be directly found in the **Explain inventory calculation** dialog as well. The most interesting from them is the *Remaining _{i-1}*, i = 2,… . The

We have intentionally set Streamline to determine safety stock as the demand for the given number of future periods (1 month in our example) to be able to show you how the order amount is calculated.

*D(OC*= 11 + 52 + 3 + 27 = 93;_{2})*Safety stock*=_{2}*Safety stock*- 9 = 94 - 8 = 84;_{1}

Now, let's replace the parameters with the values:

**Order qty _{2}** = MAX(CEILING(MAX(0, 93 + 84 - 30 - 104), 12), 60) = MAX(CEILING(43, 12), 60) = 60.

This example is pretty simplified as it doesn't have imported:

- batches – the Write-offs row of the table is empty; and
- BOMs or distribution centers – Debt after arrivals row of the table is empty.

To calculate the ordered quantities correctly in these more generic cases, the formulas (1) and (2) should account for the values from the mentioned rows.

To find out how the future on-hand levels at the end of each period are calculated, we will use two rows of the dialog table, **Inventory + in transition** and **Planned order arrivals**.

If you set the cursor at any cell of the **Inventory + in transition** row, you'll see the cells taking part in the calculation of the value. This row calculates the remaining on-hand at the end of each subperiod based on the:

- on-hand level at the end of the previous subperiod; and
- item consumption, possible write-off, safety stock debt, and in transition quantity in the currently selected subperiod (see figure below).

In other words, this row shows on-hand remaining at the end of each subperiod without taking into account Streamline's deliveries (the **Planned order arrivals** row). The resulting projected inventory levels, which is the sum of the **Inventory + in transition** and **Planned order arrivals** rows, are indicated in the **Projected inventory** row. Consequently, the amounts at the end of each data aggregation period in this row make up the **Projected inventory levels** report (see figure below).

ordering-plan-calculation-general.txt · Last modified: 2019/10/30 09:58 by admin

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