Order Tables are Used when Assigning the Order Method to each Stock Item this will determine the Suggested Order Quantity. In this Knowledge will Explain the algorithm for calculating the re-order quantity.
TABLE OF CONTENTS
- 1. Stock Balance
- 2. Current Month Sales
- 3. Weighted Average Sales Calculation
- 4. Re-Order Level Calculation
- 5. Recommended Order Quantity
- Find the stocks balance.
- Find the weighted average monthly sales. (Current and last four months of sales, multiplied by weighting factors, divided by 100).
- Find the re-order level. (Weighted average monthly sales multiplied by the weeks cover, divided
by average weeks per month).
1. Stock Balance
| This Equals | Quantity on Hand | nnn |
| Plus | Receipts in Progress | nnn |
| Plus | Quantity on Order | nnn |
| Less | Back Orders by Customer | nnn |
| Total A | XXX |
2. Current Month Sales
To ensure that orders are early in the current month are not based on low sales history, the current
months sale is the larger of the actual or simple average of the last five months sales.
3. Weighted Average Sales Calculation
Multiply the following weighting factors by the sales history.
| Current Months Sales (or Avg) | * 40 | = nnn |
| Last Months Sales | * 27 | = nnn |
| Two Months Ago Sales | * 17 | = nnn |
Three Months Ago Sales | * 10 | = nnn |
| Four Months Ago Sales | * 6 | = nnn |
| Sum of Factors | = 100 | Total B XXX |
| Divide Total B by 100 | ||
| nnn / 100 | ||
| = Total C XXX.XX |
4. Re-Order Level Calculation
Multiply the average weighted sales by the weeks cover.
nnn * x
= Total D XXX.XX
Divide Total D by average weeks per month. The factor for this is 4.3333 (recurring).
nnn / 4.3333
Round the answer to a whole number, eg
- decimal portion under .5 = round down - decimal portion.5 and over = round up
5. Recommended Order Quantity
Subtract the Total A from the Total E
Total E nnn - Total A nnn = X This is the Suggested Order Quantity
Note:- If Total A is greater than Total E, there is sufficient stock On Hand to meet sales demand, therefore no order will be suggested for this part.
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