Order points and line points determine the amount of inventory to stock in your warehouse. In a multiple branch warehouse company, transfer points and transfer surplus points determine the quantities for replenishing branches.
This is the minimum amount of stock you want to have on the shelf for a given item so a warehouse can meet demand while waiting vendor replenishment.
The order point considers the vendor lead time and safety days for the product. When a product's projected inventory level (PIL) falls below its order point, the system suggests purchasing back to the line point.
When calculating the order point for a baby branch in a parent/baby relationship, the lead time for the baby branch is the greater of the lead time of the parent branch or the transfer cycle from the parent branch to the baby branch. This method protects the baby branch from running out of material during the transfer cycle.
Note: You can set a minimum-only order point for a product to make sure the system uses the largest line point available.
This is the upper limit to the amount of stock you want to have on the shelf for a given item so a warehouse can meet demand during the order cycle of the product.
The line point considers the vendor lead time, safety days, and order cycle for the product. The line point can vary as the order cycle changes. For more information, see How the System Calculates Line Points and How the System Calculates Line Point Safety Days.
When calculating the line point for a baby branch in a parent/baby relationship, the lead time for the baby branch is the greater of the lead time of the parent branch or the transfer cycle from the parent branch to the baby branch. This method ensures that the baby branch's order point is not higher than its line point.
The time it takes to sell enough of a product to contribute to meeting the vendor target for the product's buy line. The order cycle can vary when some products in a buy line sell faster than others.
Before the system calculates order points, line points, transfer points, and transfer surplus points, it needs to start with a "clean" demand sample. To create a clean demand sample, the system use inventory parameters to do the following:
See Also:
About Service Level Numbers and Standard Deviation