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IC120 - Economic Order Quantity and Reorder Calculation
**Form Purpose
Run Economic Order Quantity and Reorder Calculation (IC120) to calculate the
reorder point (ROP) quantity and/or the economic order quantity (EOQ). The ROP
determines when to reorder and the EOQ determines how much to reorder.
To update the ROP, assign items to the variable (V) Reorder Point Code
defined in IC12.1 (Item Location) in the Reorder tab. To update the EOQ,
assign items to the economic (E) reorder quantity code in IC12.1 and define
the company's overall carrying cost percentage and ordering cost. You can run
this report to calculate reorder quantities for all items regardless of the
reorder point code and reorder quantity code.
**Processing Effect
The ROP calculation formula is:
[(annual usage x leadtime days) divided by 365] plus the safety stock
quantity.
The EOQ calculation formula is the square root of [(2 x annual usage x
ordering cost) divided by (carrying cost percentage x unit cost)].
The EOQ and ROP calculations can be based on transaction history or a
specified forecast period defined in IC19.1 (Forecasts) or both. If
calculated, you have the option to update the EOQ and ROP values to Item
Location records defined in the IC12.1 (Item Location) Reorder tab.
This form also provides options for you to update these values to the Item
Location record and update the reorder quantity with the EOQ value. Otherwise,
you can edit this report and manually enter these values after you made
adjustments. If the ROP is updated, you can calculate when to reorder based on
this value in IC140 (Vendor Reorder Advice) or IC225 (Inventory Reorder
Advice).
In order for this program to recalculate the reorder point for an item
location record, you must have one of two situations set up ahead of time as
follows:
1. Enter either a number in the Sales, Issues Periods parameter of IC120 or
enter a number in the Forecast Periods parameters of IC120.
2. Have a Forecast Number on your ITEMLOC record (set up in IC12). This does
not mean the program will calculate a reorder point with a non-zero value, but
without one of the two points above, no reorder point is calculated for the
item location.
**More Information
You can process items in this form by location, report group, and/or
inventory class. In addition, you can process only those item records with an
old value versus a new value difference greater than a specified percentage.
If the reorder quantity is specified for update, you can choose to round up
the reorder quantity to the nearest order multiple. For example, if the
reorder quantity is 49 and the order multiple is 12, the program rounds the
reorder quantity to 60.
Updated Files
CKPOINT - Used in back out or restart circumstances.
ITEMLOC - Reorder point and EOQ are updated if the update option is
selected.
Referenced Files
GLCODES - Used in a General Ledger common routine.
ICBIN - Used to access valid bin record.
ICCOMPANY - Used to validate the existence of the company number.
ICFORECAST - Used to calculate the annual forecast.
ICHISTORY - Used to calculate the annual forecast.
ICLOCATION - Used to print the location description.
ICRECEIPTS - Used to access costing records.
ICRPTGRP - Used to validate the report group.
ITEMMAST - Used to print the item description.
MAJORCL - Used to validate the major class.
MINORCL - Used to validate the major and minor class.
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