Order Point adjusters are parameters that allow the calculated Order Point to reflect replenishment needs based on usage at the customer level. The parameters are applied during the scheduled Replenishment Parameter update. Threshold Minimum, ASQ and Five Hi quantities are all considered when calculating the Order Point based on the Safety Stock and Lead Time for a warehouse / item. The highest of the values obtained from Threshold Minimum, ASQ and Five Hi is used to calculate the Order Point for the warehouse / item. The net result of the order point adjuster is to allow the system to compensate for how a customer’s buying habits are reflected in the purchasing and stocking of an item. This will help prevent stock out situations for normal usage patterns.
The order point helps you determine when is the right time to buy. A reliable order point is critical; however, it’s calculated based on average product usage. As most distributors know, averages don’t always represent customers’ buying habits. The goal of the order point adjusters is to provide a tool for calculating accurate order quantities for those products that experience demand that is infrequent or where order quantities vary considerably from one order to another. This tool will help improve customer service by preventing stockout situations for products that experience unusual usage patterns. There are three order point adjusters that can be set up: Average shipping Quantity (ASQ), Five-high, and Threshold Minimum.
ASQ/Five Hi Months (Usage Periods for ASQ and Five HI calculations)
Five-High ASQ Adjuster Parameters
Average Shipment Quantity (ASQ) Adjuster Parameters
If ASQ or Five Hi is in effect for calculating the order point for an item, the number of periods in the ASQ and Five Hi can be entered here. If omitted, the Rank Usage period that corresponds to the item ranking will be utilized for ASQ and Five Hi calculation. By default, 12 periods of usage will be utilized for ASQ and Five Hi calculation.
The settings for this section can be defined at the company, warehouse, or whse/item levels only.
| Months used to calculate ASQ | The number of months to analyze when calculating ASQ. |
| Months used to calculate 5-Hi | The number of months to analyze when calculating 5-Hi. |
Five Hi is used to adjust order point to account for some usage/sales patterns which normal usage math fails to address. If you have many customers buying an item in relatively low quantities, and very few customers buying that item in very large quantities, average usage may calculate an order point that will never put enough stock on the shelf to service one of the large orders.
Five Hi increases the order point to the average of the largest single shipments to ensure you order enough to fully service your large orders.
| Use Five Hi | Indicates whether to use the 5-Hi adjuster |
| Include Transfers in 5-Hi | Indicates whether transfer shipment quantities should be included in the calculation – when using a central distribution center, this should be set to Yes. |
| Number of Hits | # of document hits required before the 5-Hi calculation can be performed |
| Five Hi maximum dollar increase | If entered, the increase to order point as a result of the 5-Hi adjuster will be limited to this total cost. If this limit is imposed, and the order point is increased less than 5-Hi would have dictated, an alert will be raised to the appropriate buyers. |
The settings for this section can be defined at the company, warehouse, or whse/item levels only.
ASQ is used to adjust order point to account for some usage/sales patterns which normal usage math fails to address. If you have many customers buying an item in widely varying quantities, average usage may calculate an order point that will never put enough stock on the shelf to service your larger orders.
ASQ increases the order point to the average of all your shipments to ensure you order enough to fully service your large orders.
5-Hi is a more specific/targeted version of ASQ. When working through challenging sales patterns, try ASQ first, then implement 5-Hi if you are still not getting the order quantities you need to service your larger customers.
ASQ and 5-Hi should typically be implemented at lower levels on the hierarchy to account for usage patterns for specific items or groups of items. These setting are not typically intended to be implemented for an entire warehouse, for example.
| Use ASQ | Indicates whether to use the ASQ adjuster |
| Include Transfers in ASQ | Indicates whether warehouse transfer shipment quantities should be included in the ASQ calculations. For central distribution centers, this should be set to Yes. |
| Number of Hits | # of document hits required before ASQ can be calculated |
| ASQ maximum dollar increase | If entered, the increase to order point as a result of the ASQ adjuster will be limited to this total cost. If this limit is imposed, and the order point is increased less than ASQ would have dictated, an alert will be raised to the appropriate buyers. |
There are some circumstances in which you want to guarantee a specific quantity of an item will be on the shelf, even though usage numbers alone may not justify it.
For example, you may have made an agreement with an important customer to keep a minimum quantity on the shelf.The T-Min Order Point establishes the minimum order point for the item.
If the calculated order point is lower than the T-Min, it will be increased to the T-min. If the calculated order point is higher than the T-Min, the calculated value will be used.
| Apply a threshold minimum | Indicates whether to apply a T-Min order point |
| T-Min Order Point | The minimum order point |
| Expiration date | All T-Min values require entry of an expiration date. There is an alert which will tell the user when this parameter is set to expire |
| Memo | Optional memo to explain the purpose of the T-Min. |
See Also
Replenishment Parameter Maintenance Procedures