Proper restocking controls - ordering the right amount of an item at the right time is the essential element in both service levels and inventory turnover. The FACTS System uses Gordon Graham’s methods for this crucial operation. Based on usage rates and lead times, each item’s order point is calculated.

The order point is the available quantity where replenishment must begin to avoid risking an out-of-stock situation. Line points, based on order point and the vendor’s review cycle, determine the upper limit for ordering an item to take advantage of vendor’s quantity discounts. In addition to this order point/line point method, min/max is also available for items that are replenished from control warehouses or as desired. These two restocking methods deal with when to order. To determine how much to order, there are 3 methods:

• Manual - This is determined by the user.
  
• EOQ - Economic Order Quantity suggests buying based on the replenishment cost, carrying cost, usage, and item cost. This calculation generally produces the highest inventory turns.
  
• Movement class - This is based on an item’s dollar movement through inventory, each item is assigned to one of 13 movement classes. The class suggests the number of months supply to order. (Please see the glossary for a fuller explanation of these terms and concepts.)
  

All of these ordering controls are recalculated each month (during the End-of-Period update) to give the best prediction of upcoming usage.

The first program of the Restocking submenu is the Demand Action Report, which lists all items that have fallen to or below their order point or minimum stocking. These items demand that replenishment action begin to avoid a possible stockout. The buyer should probably run this report each morning. The Vendor Review Dates Report shows the date a vendor’s product line needs to be reviewed (based on last review date and length of review cycle) for ordering. Optionally, total current needs (total of items below line point) may be displayed. This allows the buyer to meet vendor buying requirements and take advantage of vendor discounts across a product line. The Replenishment Report recommends which items to reorder (below line point for order point/line point or below minimum stock and vendor’s percentage above minimum for min/max) and optionally posts this information to the Suggested Purchase Orders File. Purchase order production is accomplished quickly, easily and accurately using up-to-date ordering controls.

The programs on this menu are used to help you determine when and how much replenishment of items is necessary.

• The Demand Action Report should be printed on a daily basis. The report prints, by vendor, items that need immediate action, i.e., on hand quantities (plus quantity on order minus quantity committed and backordered) are below the order point or minimum stock (whichever method is used).
  
• The Vendor Review Dates Report should be run at the beginning of each month. The report lists by date the vendor to be reviewed. This report is then used each day during the month to notify you for which vendors the Replenishment Report should be run.
  
• The Replenishment Report prints, by vendor, the items that need to be ordered. The Replenishment Report should be run for direct from-vendor shipments and also for each warehouse that items could be transferred in from. This report has an optional update that may automatically create suggested purchase orders and suggested warehouse transfers.