AXIS Diplomat 2006 Accounts Additional Options

Stock Forecasting

This option provides for the calculation, each period, of the forecast demand for each stock (or product) item for the next period. The calculation is based on the forecast for the previous period and the actual issues for the previous period.

A special re-order report is provided which recommends re-order quantities for stock items falling below the recommended stock level required to satisfy the forecast demand.

The feature is well suited to those products stocked by wholesale or retail sales outlets which turnover every or most periods. Manufacturing companies with a short manufacturing lead time could also use the forecast as the basis of a sales projection from which works orders are generated.

Forecasting Method

Calculations are based on three additional pieces of information held against each stock item:

• Procurement Lead Time - this is the time, in days, required to action a purchase order from a supplier for bought in items (or a works order from the factory for manufactured items) and to receive delivery of the items ordered.
• Safety Stock Level - this is the number of days worth of stock that you wish to hold for safety (i.e.: as a reserve buffer). This converts to a stock quantity based on the current usage forecast for the stock item.
• Period Issue Forecast - this is the quantity of the stock item, forecast to be issued in the current period; i.e. the forecast demand for the stock period.
  The system assumes a stock period of one month (or 30 days).

At each stock period end, the system will calculate a new forecast for each stock item for the next period using the following formulae:

New forecast = OF + SF (AQ - OF)

Where

• OF is the old forecast (previous period)
• SF is the smoothing factor
• AQ is the actual quantity issued

The smoothing factor is automatically set as follows:

• 0.3 if the old forecast is within 25% of the actual quantity issued
• 0.5 if the old forecast is within 50% of the actual quantity issued
• 0.7 in all other circumstances (including the situation where the old forecast is zero)

Recommended Re-order Quantities

A special re-order report shows the stock reference, description, product group, lead time, safety stock, free stock, stock on order, period issue forecast, recommended stock holding, projected issue forecast, recommended stockholding, projected stock holding and suggested re-order quantity.

The above report is also available `by location' for systems with the multi-location stock module.

A function to automatically generate purchase requirements for `bought in' items based on the figures calculated as per the re-order report is available for systems with the Purchase Requirements module.

For MRP systems, a function will automatically generate works orders for `manufactured' items based on the figures calculated as per the re-order report.

In order to calculate a re-order quantity, the recommended stockholding to cover the period to the next review date is calculated as follows:

Calculation of Re-Order Quantities

RS = (CF x (RP + LT + SS)) / 30

Where

• RS is the recommended stockholding
• CF is the current forecast quantity for the stock ledger period
• RP is the review period in days (default 30)
• LT is the procurement lead time in days
• SS is the safety stock level in days.

Calculation of Projected Stock Holding

The projected stockholding at the next review date, assuming that no further orders are placed, is also calculated:

PS = FS + SO - ((CF x RP) / 30)

Where

• PS is the projected stockholding
• FS is the quantity of free stock
• SO is the quantity of stock on order
• CF is the current forecast quantity for the stock ledger period
• RP is the review period in days (default 30)

Finally the re-order quantity required to achieve the recommended stockholding at the end of the review period is calculated thus:

RQ = RS - PS

Where

• RQ is the exact re-order quantity required
• RS is the recommended stockholding
• PS is the projected stockholding

The system then automatically rounds up the re-order quantity to the nearest higher multiple of the economic re-order quantity for the item.

Note that the only stock items eligible for re-ordering will be those for which the projected stockholding is less than the recommended stockholding.

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