Calculate Planning Data

The Calculate Planning Data is used to automatically calculate and update the planning settings for selected parts.

The purpose of the calculation is to facilitate calculation and update of planning settings, safety stock level, order point, and lot size based on part data, using the Wilson formula.

Data used in the calculations

When calculations are performed, the data used are retrieved from different places in the system. The system retrieves the following information from the inventory part record:

Service Rate (%); used for calculation of safety stock level.
Inv. Interest (%); used for calculation of economic lot size.
Setup Cost; used for calculation of economic lot size.
Predicted Yearly Consumption; used for calculations when the part is not qualified to use the statistics.

If Commodity Group 2 is specified for the inventory part, the system will use the value in the Min Periods field in the commodity group setup. This value is used to control whether the statistical data or the predicted yearly consumption will be used when performing the automatic calculation of planning data. The value in the Min Periods field is the shortest period the part must have been active before the statistical data is used. If the part has been active fewer periods, the predicted yearly consumption will be used. The default value for the column is three periods. If no commodity group 2 is entered for the inventory part, the system will use three periods in calculations, as default.

Service rate, inventory interest, setup cost, and min periods are all controlled by commodity group 2, which is specified in the inventory part record.

The system will retrieve the No of Periods for Plan Data Recalc setting, which is used to control the number of periods the calculations are based on. This is set in Parameters for Supply Chain and Manufacturing page. The setting is used as default in Calculate Planning Data, where you can change it before you start the calculations.

The statistical data that is used in the calculation can be viewed in On Hand Develop per Period. Please note that the data is aggregated per period and not on individual issues.

Calculations

Depending on the type of calculation, inventory parts with different planning methods are subject for calculations. You must have enabled at least one of the automatic update functions. These functions are safety stock, order point, and lot size.

Calculation of Safety Stock

The safety stock is calculated for all planning methods.

Safety stock (pieces) = Safety factor [-] * standard deviation for demand (pieces/period) * square root of part lead time (period)

The lead time is retrieved from the inventory part record, purchase or manufacturing lead time depending on part type.
The safety factor is retrieved from the service rate connected to the inventory part. Here the normal standard distribution is used to define the service rate and the safety factor. The service rate is considered as the probability and the safety factor is considered as the standard score of normal standard distribution. It is also possible to retrieve the safety factor for a given service rate by using the standard Excel function NORMSINV(Probability).

Note: The safety stock will not be updated if the predicted yearly demand is used, as standard deviation is zero because of constant demand. Also note that if lead time is zero, the safety stock will be zero.

Calculation of Order Point

Only inventory parts with planning methods B or C uses order point.

Order point (pieces) = [Average demand (pieces/period)] * [Lead time (period) + Safety stock (pieces)]

Calculation of Lot Size

Only inventory parts with planning methods B or C uses lot size.

Economic lot size = square root of {(2 * Ordering Cost (value) * Average issues per period (pieces/period) * [number of periods per year (periods/year) / (Carrying cost (value/year)] }

The Carrying cost is calculated as (inventory interest * inventory value per part).

Note: If the carrying cost is zero, the lot size will not be updated.

When the planning method is C, a validation is performed after the calculations to prevent validation error when trying to update the inventory part. If the replenishment level is less than or equal to the order point the system will set the replenishment level to the order point plus one item.