Inventory Methods

Once you have determined which parts should be buffered or have stock held against them, you will need to determine which inventory method to use to manage and maintain the appropriate level of stock. Most items will be buffered, but there are several other types that can be used to meet limitations or other requirements.

Inventory Methods

The Inventory Method must be established to determine how the item stocking levels will be maintained within R+. There are multiple options to choose from which are explained below:

• Replenished/Buffered: an inventory method that indicates to hold stock on an item.

• Min/Max: a type of buffering that sets an upper and lower limit of inventory. The “min” is the reorder point and the “max” is the “order up to” inventory level. Used for nonstrategic and readily available stocked parts and stock-keeping SKUs.

• Replenished Override: similar to a buffered item, these parts are managed by a static (as opposed to dynamic) three-zoned buffer. Used for when there are defined limitations within the planning environment (space, capacity, cash, etc)

• Nonbuffered: an inventory method that indicates that you will not hold stock on this item.

• Lead Time Managed: an alert flag that can be assigned to critical nonbuffered items, often with long lead times, to indicate that special attention should be paid to the part.

Determining Inventory Method

Buffered Parts

Below are some reasons why you may choose to set parts to Buffered:

• Replenished parts are normally restricted to higher value and/or “critical” purchased and manufactured parts; Buyer/Planner has a desire to actively manage when to reorder. The highly visible re-supply signal allows flexibility in purchasing and scheduling (make parts).

• There is a desire for the re-supply orders to carry a visible priority level (expedite, high, medium, low) based on buffer status; Buyer/Planner has a desire to have re-supply orders released by specific action of the buyer/planner (NOT automatic supply order release).

• Primary buffer sizing calculation is average daily usage (anticipated RATE of pull) over part lead time (dynamic adjustments).

• Replenished part buffers reflect on going adjustments for anticipated changes in demand levels (seasonality, promotions, new part build up, discontinued parts—planned adjustments).

• Specific buffer size and properties are directly related to anticipated level of a demand variability (level of demand deviation from average), part properties, and supply variation (reliability of supply based on lead time).

• Replenishment works better for long lead time parts than Min/Max.

• Work order demand allocations do NOT penetrate to Bill of Material children below buffered parts if available stock is not adequate to cover demand (“de-coupling” effect); This is significant for lead time compression.

• Highly visible execution alerts (Projected Stock Out, Current Inventory, Material Synchronization)

Min/Max Parts

Below are some reasons why you may choose to set parts to Min/Max:

• Min/Max parts typically are low value, high volume purchased and manufactured parts.

• Min/Max also used for parts with infrequent, highly variable, or unknown rate of demand pull.

• Min/Max buffer levels are fixed quantities: Common practice to set minimum buffer size to largest, anticipated single market pull (RATE of pull is ignored).

• Re-supply is automatic “trigger’ once available stock level is at or below minimum.

• Re-order quantity is fixed (difference between max and min quantities).

• Min/Max re-supply order requirements do NOT have any prioritization.

• Min/Max buffers NOT reflective of changes in market demand pull rate.

• Works well for short lead time parts, but not long lead time parts.

• Work order demand allocations do NOT penetrate to Bill of Material children below buffered parts if available stock is not adequate to cover demand (“de-coupling” effect); This is significant for lead time compression.

• Highly visible execution alerts (Current Inventory, Material Synchronization).

Non-Buffered / Lead Time Managed

• Non-Buffered parts, by definition, are not planned (i.e. not planned inventory). They are either make or buy to order.

• Supply requirements driven only by parent work order and/order sales order demands.

• Supply requirements are determined by netting demand against available stock.

• No impact on BOM de-coupling or lead time compression.

• Highly visible execution alerts (Material Synchronization, Lead Time Managed). Attributes to using Lead Time Managed part vs. just a non-buffered part. This relates to alert functionality:

  • • Must be a non-buffered part.

    • Typically, long lead time part.

    • Desire to have additional visibility of timing of requested delivery date of part—Critical that the part be delivered On Time.

    • Vendor delivery performance is generally poor and unreliable.

    • This functionality makes part strategic in nature.