Inventory Replenishment

In any business involved in the sale of goods , the business needs to keep a track of its inventory and replenish the inventory when needed. The business can use different methods to replenish their inventory.

The Inventory replenishment methods provided by Oracle include

1. Min-Max Planning
2. Reorder Point Planning
3. Kanban Replenishment Planning
4. Replenishment Counting

When Placing an order for replenishing the inventory , the business needs to answer certain quetions

1. What should be ordered
2. How much should be ordered
3. When should it be ordered
4. Which planning method should be used to decide the order

Lets see the answer to these questions:

1. What should be ordered : The business needs to decide what products/goods it needs to buy
2. How much should be ordered : When deciding on this the business needs to consider the carrying cost of the goods and the expected demand
3. When should it be ordered: This will be answered by the replenishment method used
4. Which planning method should be used to decide the order : It is decided by the business depending on Oracles offering of each mechanism

Of the replenishment methods listed above , some can be performed at Organization/warehouse level and some at sub-inventory level

Now we will look at the different replenishment methods :

Re-Order Point Planning : is an inventory replenishment mechanism in which the inventory is replenished when the inventory levels fall below a certain pre-defined level. The amount of order placed is equal to EOQ (Economic Order Quantity) . This mechanism is suggested for in-expensive items.

Re-Order Point : Safety stock + Forecasted demand during the lead time , lead time is the time in which the business expects the goods to be delivered

This mechanism can be used in cases of:

• replenishment at Org level is done
• for inexpensive items
• item demand is independent of others

 Min-Max Planning: Min Max Planning is another simple method of inventory planning with the below features

• User  defines the minimum and maximum inventory levels of the item
• Inventory is replenished to the maximum level when the level reaches the minimum level
• Can be applied to any number of items

This mechanism can be used in cases of:: 

• Inventory replenishment is planned at Org or sub-inventory level
• the items do not require strict inventory monitoring

Kanban Replenishment : Kanban Replenishment Planning is a replenishment mechanism which depends on visual cues for inventory replenishment. This mechanism is applicable for items which require shorter lead times,having a constant demand and medium to high production demand

Kanban uses replenishment signals which are easily indicative and visible : in means of color coding scheme, color cards or empty bins.

Depending on the mechanism used once the inventory needs to be replenished as per the signals business will have the replenishment.

The inventory replenishment in Kanban can be on the type of replenishment chosen:

1. Inter Org: In this case an internal requisition is created
2. Intra Org: In this case goods are transferred from one sub-inventory of the warehouse to the other
3. Production : Creation or release of a production job is done
4. Supplier: A purchase requisition is created

Replenishment Counting: Replenishment counting is used for items for which inventory tracking is not maintained. In this mechanism the counters will physically count the inventory on a periodic basis and replenish the inventory as and when required.

  

Inventory Planning and Replenishment

In a business maintaining inventory of goods , the business needs to replenish the stock of the sold goods to maintain the required inventory for normal business operations

The Inventory replenishment is determined by the inventory replenishment method employed by the business

      1.       Min-Max Planning

      2.       Kanban Replenishment Planning

      3.       Replenishment Palnning

      4.       Re-Order Point Planning

The Re-Order of Inventory raises a lot of questions which need to be answered

      1.       What should be ordered

      2.       How much should be ordered

      3.       When should the goods be ordered

      4.       Which planning method to use

How Much to Order : This depends on the relation between the supply and demand and the inventory replenishment lead time.

Inventory Forecasting: Inventory forecasting is the process of extrapolating the expected demand of the goods over an expected number of periods

Inventory Replenishment methods

      1.       Min-Max Planning

      2.       Kanban Replenishment Planning

      3.       Replenishment Planning

      4.       Re-Order Point Planning

Re Order Point Planning

As the name suggests this method of replenishment will replenish the inventory when the inventory level falls below a certain decided point.

The goods ordered are equal to the EOQ (Economic Order Quantity)

This mechanism is recommended for the items which are not very expensive

Re-Order point planning steps

1.       Enter item planning attributes

2.       Forecast item demands

3.       Define safety stock

4.       Run Re-Order point report

Min-Max Planning

The items are planned depending on the user defined Minimum and Maximum quantity.The items are replenished to the Maximum level once it falls below the Minimum Level. It is generally applied to low cost items which do not require strict monitoring

Kanban Planning:

Kanban is a pull replenishment system whose aims is zero stockouts, shorter lead times, and reduced inventory with minimal manual supervision. Instead of waiting for an MRP plan to release materials down the supply chain, with kanban each operation pulls the materials it needs from its source when it needs them, signaling with a replenishment signal or a kanban that it needs to do so.

Kanban

The term kanban refers to a visual replenishment signal such as a card or an empty bin for an item. In a kanban system, each work center has several bins, each containing a certain number of the same item. When a bin becomes empty, the work center starts the process of replenishing the empty bin by sending the replenishment signal, or a kanban. Meanwhile, the work center can continue using the other (stocked) bins.

Types of Kanban Replenishment:

Inter Org: Replenishes by creating Internal Requisition

Intra Org: Triggers Material movement from a subinventory in the same Organization.

Production: Creates or releases a Production Job

Supplier: Creates a Purchase Requisition.

Kanban Elements:

Pull Sequence is a group of information that defines a Kanban location, source information, and planning parameters for an Item.

 Kanban chain is a series of Pull Sequences, which defines the replenishment network. E.g.: Assembly to Stores.

Kanban Cards are created for Item, Subinventory and Locator (optional) and uniquely identified by a Kanban number

 Replenishable Cards can be created automatically through Pull Sequence or manually through „Kanban Cards‟ window.

Replenishment Counting

• Replenishment Counting is a method of ordering Items for non-Tracked Subinventory.

• Non-Tracked subinventories are expense subinventory, for which On-hand balances are not maintained.

• Whenever an Item is moved into Expense Subinventory, the Expense account is charged and the quantity is discarded.

• Items are replenished in Non-Tracked Subinventory by periodically counting the items physically.

Inventory Transactions

Transactions in the inventory are classified depending on the flow

Material Flow:

         1.       Receive Goods

         2.       Move Goods

         3.       Issue Goods

Business Flow:

         1.       WIP à Inventory

         2.       Purchasing à Inventory

         3.       Order Management à Inventory

         4.       Services à Inventory

Different types of Inventory Transactions

         1.       Miscellaneous issue

         2.       Miscellaneous receipt

         3.       Sub inventory transfer

         4.       Inter org transfer

Miscellaneous Issue:

Users can use miscellaneous transactions to issue material from general ledger accounts in your current organization. Items are issued from the inventory without any documentation

Miscellaneous Receipt:

Users can use miscellaneous transactions to receive material to general ledger accounts in your current organization. Items are issued from the inventory without any documentation

Sub Inventory Transfer

Users  use sub inventory transfers to transfer material within your current organization between sub inventories, or between two locators within the same sub inventorys

Inter Org Transfer

Users  use direct inter-organization transfers to move inventory directly from shipping organization to a destination organization

Managing Inventory Receipts

Users can receive both internally and externally sourced shipments and deliver material directly to inventory, the shop floor, and you can deliver to inventory, shop floor, and expense destinations

Types of Inventory Receipts

Direct Shipment:  A direct Shipment enables the users to receive and deliver the goods to the inventory by a single inventory transaction

Standard Receipt: This is a2 step of performing the receipt of goods. The process enables the users to receive the goods in one inventory organization and deliver in another organization

Inspected Receipt: This is a 3 step of performing the receipt of goods. The process enables the users to receive the goods in one inventory organization, inspect the goods and deliver in another organization.

Move Order

A move Order is a document which enables the movement of goods within a single organization. Move Order document keep track of the intra org transfer of the materials. The move order document Is created when a sales order is pick released. The move order document is used by the warehouse personell for performing picking.

There are 3 activities in Move Orders:

Move Order Creation: Creation of the move order documents

Move Order Allocation: Allocation of the goods to the move order

Move Order Transaction: Transfer of the goods within the organization as specified on the move order