6.order parameter

1. 1. Ordering
To have goods to be sold,
the first things to do is ordering the goods to supplier.
To get the good qty order proposed by the system,
Commercial has to set order parameter correctly.
1. Ordering

2. 2. Terminology in Ordering
Lead Time
Order Period
Minimum Stock
Final Stock
Safety Stock Day
Average Sales
Order Not Yet Received
Qty/pack
Supplier/Vendor/Principal
2. Terminology in Ordering

3. Parameter depends on SYSTEM
- Average Sales
- Final Stock
- Order Not Yet Received
- Return Not Yet Confirmed
Parameter depends on SUPPLIER
- Order Period (may be adjusted by the Sales manager)
- Lead Time
Parameter depends on SALES MANAGER
- Variant coefficient
-Safety Stock Days
- Minimum Stock
(AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
Other Parameters
Parameter depends on SALES MANAGER
- Cancel day
- Order day
Order Formula
3. P4 Order Formula

4. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
AVERAGE SALES:
Average sales quantity in a specified period (Normal selling price).
Nationally defined 35 days period.
For promotion items, the system takes the 2 last promotion periods.
(AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
ORDER PERIOD:
Frequency of orders, as measured by the number of days between last order
(excluded) and the current order (included).
Attention point:
The frequency of orders should take into consideration a minimum of units, or a
minimum value, for each PO, as a supplier cannot go under a minimum
profitability limit.
Examples: “order period = 7” means : 1 PO by week
“order period = 14” means : 1 PO every 2 weeks
“order period = 3,5” means : 2 POs by week
Attention point:
There are plenty of definitions of average sales calculation and as many
formulas.
P4 Order Formula
3. P4 Order Formula

5. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
LEAD TIME:
Number of days needed by the supplier between the day of order (excluded) and the day of
delivery (included).
It has to be understood “door to door” (supplier’s door // store receiving door).
Attention points (1/2):
The lead time calculation is not the same according to the supplier type:
Direct supplier:
LT = Number of days for the preparation of the quantity ordered by the store
+ Number of days to ship the quantity ordered to the store
Direct supplier using an expedition company (road transportation):
LT = Number of days needed by the supplier for the preparation of the quantity
ordered by the store
+ Number of days needed by the supplier to ship the quantity
ordered to the delivery company
+ Number of days needed by the delivery company
to consolidate the shipment (unpredictable)
+ number of days to ship the quantity ordered from the delivery company to the store
P4 Order Formula
3. P4 Order Formula

6. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
SAFETY STOCK DAYS:
The minimum stock level to keep in days of sales according to the supplier reliability and the
average sales of the item.
Attention point:
To be maintained at item level, not supplier level for direct suppliers:
This parameter changes the quantity to be ordered according to the average sales of the item,
therefore, it is a “flexible” parameter.
(AS * (OP+LT+ SSD) *VC)+MS-FS-ONYR+RN)
AS > 10
AS < 1
1 < AS < 6
6 < AS < 10
SSD = 3
SSD = 2
SSD = 1
SSD = 0
Recommendation, by SKU:
P4 Order Formula
3. P4 Order Formula

7. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
VARIANT COEFFICIENT (SUB-FAMILY LEVEL):
Usually not used, because the maintenance is very heavy.
Attention point:
Make sure that the variant coefficient is 1.
(AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
MINIMUM STOCK, or Shelf Capacity:
The shelf capacity is used to maintain a fixed minimum stock by SKU before the
next delivery. It is the limit we cannot go below.
Attention point:
To be maintained at the SKU (sub code) level, not item level:
This parameter changes the quantity to be ordered adding an other quantity,
therefore it is a “fixed” number, equal for each Purchase Order whatever the
average sales is.
P4 Order Formula
P4 Order Formula
3. P4 Order Formula

8. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
The minimum stock is the OPTIMAL quantity the commercial manager has
determined to be available JUST BEFORE RECEIVING THE NEXT DELIVERY,
based on the following rules:
DO NOT MAKE THE CONFUSION WITH THE NUMBER OF UNITS YOU CAN DISPLAY
ON THE SHELF
P4 Order Formula
The Shelf Capacity in P4 is also called Minimum Stock
3. P4 Order Formula

9. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
FINAL STOCK:
Remaining stock in units the day of the Purchase Order (in the system!).
Attention point:
The stock level in units must be adjusted regularly through cycle count.
A wrong Final Stock leads to stock out or Over Stock.
(AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
ORDER NOT YET RECEIVED:
Expected quantity to be delivered due to the previous Purchase Order.
This “pending” quantity decreases the quantity suggested by P4.
Attention point:
It is important to cancel the ONYR thanks to a reasonable number of “Cancel
days”
(see “Cancel days”).
P4 Order Formula
3. P4 Order Formula

10. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
RETURN NOT YET DEDUCTED:
Quantity added to the quantity ordered to replace expired or damaged items.
The RN quantity comes from the Returning list.
This RN quantity is still included in the Final Stock.
Attention point:
The Returning list adds quantities to the Purchase Order.
The Returning report deducts quantities from the Final Stock.
P4 Order Formula
3. P4 Order Formula
Already not used Exc. For Dept.15

11. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
Other parameters
CANCEL DAY:
The number of days we accept suppliers to be late
before to cancel the Purchase Order after the “expected
delivery date”.
Attention point:
Setting long cancel days keeps the Purchase Order a live,
therefore the quantity ordered previously may be deducted
from the next Purchase Order.
Recommendation: not more than 1 or 2 days.
If the supplier has difficulties to deliver on time, better to adjust
the Lead Time.
3. P4 Order Formula

12. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
Other parameters
ORDER DAY:
The day of the week the Sales manager plans to order to a supplier.
Attention point:
The order day impacts the delivery day.
(Order day + Lead time = Delivery day)
As we know that the suppliers are not willing to wait hours in front of our
unloading docks, it should be better to work on the order and delivery
schedule to enable the Receiving team to adjust the manpower to the
workload.
No traffic jam at the receiving yard !
3. P4 Order Formula

13. (AS*(OP+LT+SSD)*VC)+MS-FS-ONYR+RN)
ORDER QUANTITY:
The Quantity that sales manager order based on system calculation
Order Qty (Box) =
Order Qty (pcs)
Qty / Pack
Condition (Note):
 If SC = 0 then Order Qty = 0 even the AS>0
 If Order Qty < 1 Box then:
(1) if FS > SC then the Qty Order = 0 Box
(2) if FS < SC then the Qty Order = 1 Box