Lets take a look at the two most basic ordering constraints: Minimum order quantities (MOQ) and Order multiples (Mult).
Minimum Order Quantities
MOQ is when our supplier says something like "you cannot order less than 2,500 of this product at a time." If this number is a significant fraction of the forecast, we may be forced to order more inventory than what we need.
Look at the example to the above: In this example our Order up to is 3,961, and our Net stock position is only on 1,775. Ideally we would like to order 2,186 to get to our Order up to level, but this supplier has a Minimum order quantity constraint of 2,500. Sage Inventory Advisor takes this into account, and Recommends we order the minimum of 2,500.
And you can also see that we are ordering 109 days worth of inventory, instead of the 86 days we wanted.
Order multiples is when our supplier says something like "when you place an order, it has to be in multiples of 500." This can affect us either way, as Sage Inventory Advisor always tries to round to nearest multiple.
Looking at the example on the left, the Ideal order is 6,647. The MOQ is 5,000, so that doesn't affect us, but we have an Order Multiple of 500. In this case Sage Inventory Advisor rounds the ideal order down to 6,500. This means that we may have to reorder a little sooner than what we anticipated.
There are only two cases in which Sage Inventory Advisor will force the order to round up to the higher Multiple:
- When ordering for a non-stocked item. Sage Inventory Advisor will keep adding one more order multiple, until all firm demand gets covered
- When we have set a Minimum stock level for an item, Sage Inventory Advisor will do the same, to ensure the stock on hand will be at least equal to the specified level.
In conclusion, these two very simple ordering constraints can significantly affect your inventory levels, and also complicate your ordering process. Luckily Sage inventory advisor takes these constraints into account when recommending an order. At the same time Sage inventory advisor will show you where the differences are, so that you can make an informed ordering decision.
If you are already using Sage Inventory Advisor and want to get the most out of it, then please give us a call here at the office. We can help to answer any questions you might have.