The primary objective of the SYSPRO Inventory Optimization module is to calculate and output minimum and maximum (min/max) stock levels for stock items by calendar period.
These min/max levels are then utilized by the Requirements Calculation to derive an optimal requirement in an environment where demand varies over time. This enables you to more accurately provide sufficient stock cover for the expected variability of the demand at the target service level.
Minimum levels are determined using the policy settings defined against the stock items (IO Policies) historical sales demand and forecast accuracy.
Maximum levels are then computed by adding the forecast demand to the calculated minimum level. This applies to risk-based policies. Fixed policies also have min/max levels, but here the user determines the min/max levels.
This procedure outlines the steps you should follow to configure your Inventory Optimization module.
Some of these steps are optional and depend on how you intend implementing this module.
In addition, some of these steps may already have been implemented in the Inventory Forecasting module, but you may want to review them in the context of Inventory Optimization.
Use the Inventory Optimization - General Setup, Inventory Optimization - Forecast Algorithms Setup and Inventory Optimization Modeling Setup programs to indicate the setup options you require, for Inventory Optimization.
Use the Requirements Planning Setup program to indicate the Forecast Depletion options you require.
Use the Forecast Calendars program to configure and save your Forecasting Calendars.
Ensure that the information against your stock items is defined according to your requirements Stock Codes. In particular, batching rules D, E and Q. For batching rule Q, the order policies M, I and S are used against the warehouse.
Specifically, if you want to use the minimum and maximum levels computed in Inventory Optimization in the Requirements Calculation, then you need to set the batching rules accordingly (see Replenishment).
Use the IO Selection Sets program to define your selection sets.
Use the Options Maintenance program to indicate the forecasting options you require.
Use the IO Policies program to configure the policies you require against a few of the stock items you want to include in Inventory Optimization.
You typically define policies against groups of stock items (selection sets) according to specific characteristics, such as a common life-cycle. However, you should first define a policy against one or two items in the intended selection set and only apply it to all items in the set once the policy is optimal, using the IO Copy Policies program (i.e. we do not recommend a big bang approach where all stock codes have a target service level of, for example, 99%).
Use the Initial History Creation program to take on your sales history. For Inventory Optimization, the history created should be based on both inventory movements and sales order performance.
Use the Import Demand History program to import demand history. You typically use the Import Demand History program if you have insufficient inventory movement history for forecasting purposes.
Use the Lost Sales Import program to import lost sales information into the IOP Sales History Adjustments (IopSalesAdjust) table for use in forecasting.
Run the Lead Time Calculation in the Bill of Materials module.
Run the IO Stock Levels Modeling program for a few stock items.
Review the Stock Levels, paying specific attention to the suggested minimum and maximum levels. This will give you an indication as to whether your policies (and specifically, the target service levels) are realistically defined.
Use the various Modelling Options in this program and use the Calculate function to view the results. You may want to change the options you selected on the Modeling tab of the Inventory Optimization Modeling Setup program accordingly.
Once you have optimised the min/max levels for the selected stock codes in the IO Stock Levels Modeling program, copy these to the Current min/max levels for use in the Requirements Calculation program.
Run the Requirements Calculation program.
Use the Requirements Planning Query program for the same few stock items used in the IO Stock Levels Modeling program and check the results.
Make adjustments to implementation options, configurations and settings as required according to the results displayed in the IO Stock Levels Modeling and Requirements Planning Query programs.
Once you have optimized the min/max levels for selected stock items, you can implement Inventory optimization for the bulk of your stock items as follows:
Use the IO Batch Policy Maintenance and IO Copy Policies programs to apply policies to all stock items you want to include in Inventory Optimization.
Use the IO Batch Levels Calculation program to calculate the suggested minimum and maximum levels for these stock items.
Use the IO Draft Levels Approval program to copy the Draft minimum and maximum levels to the Current minimum and maximum levels for these stock items.
Although there are no prescribed steps for processing within the Inventory Optimization module, on an ongoing basis, you would typically:
Monitor forecast accuracy according to management criteria, especially those items beyond tolerance levels.
Run the Forecast Accuracy Review to measure and compare your historical forecasts against your actual sales movements, including lost sales.
You can also use the Forecast Accuracy program to generate a report of this information.
Run the Service Level Review program to review your target service levels against your actual service levels.
Review IO policies (see IO Policies).
Especially review and adjust the Target service levels on an ongoing basis according to the internal and external factors/constraints affecting your business at that specific point in time.
Run the Lost Sales Review to view details of lost sales currently in the Sales Order Lost Sales (SorLostSales) table and to add or delete lost sales.
Use the Demand History Maintenance program to clean up your data. This is only necessary when the base data is not reliable.
Adjustments can be made to the history to ensure that it is representative of typical sales for the product at the time of year.
Run the Pareto Analysis program when appropriate.
When lead times are changed, run the Lead Time Calculation in the Bill of Materials module. For Distribution environments, update the lead time against the stock codes (Stock Codes).
Run the Forecast Comparison program to compare current forecasts with draft forecasts, enabling you to check the reasonableness of newly-generated draft forecasts.
Run the Requirements Calculation program. Monitor the suggestions made by MRP (to satisfy the demand from IO, or Forecasting) and ascertain that these are achievable.
Run the Excess Stock Review program to calculate excesses and shortages of stock based on the min/max levels calculated in Inventory Optimization and incoming and outgoing sales orders.
Run the IO Purge and Update program to remove history information that is no longer required and to purge invalid data (e.g. where the stock code or stock code/warehouse combination no longer exists) and to update the IO sales history tables for all stock items.