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Columbus Global

Use Order Point Quantity (Par Level) to Keep the Right Stock On-Hand


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    Poor management of inventory can lead to painful stock-outs as well as expensive excessive inventory.  Inventory replenishment methods and triggers should strategically align with the desired level of service both for internal and external customer demand.  Microsoft Dynamics GP offers tools to facilitate inventory planning and procurement.  Among these are MRP (material requirements planning) and Purchase Order Generator.  Both use the Order Point Qty/Par Level and safety stock quantity concepts.

    What is Safety Stock?

    Once an enterprise has determined the appropriate satisfaction rate, the inventory control team can use that to calculate an appropriate safety stock number.  Safety stock is the inventory that will be maintained above the standard demand rates.  This inventory works to maintain smooth operations in spite of lead time issues or unexpected demand.  In environments that require a high (95%+ satisfaction rate) the safety stock is correspondingly high.  Every item in the GP system can have its own, site-specific safety stock level.

    What is the Order Point Qty/Par Level?

    The Order Point Qty/ Par Level field functions as an ordering trigger to the purchasing team.  For min/max style replenishment, users see this trigger when they interact with Purchase Order Generator.  The Order Point Qty/ Par Level can be easily calculated by taking item usage x the lead time x safety stock factor.

    Example:

    An item is used at a rate of 10 per week.  It takes 2 weeks to place a PO and receive a shipment from the vendor.  The safety stock ratio is .25 in order to achieve the desired customer satisfaction level

    10 x 2 x 1.25 returns a value of 25.   So the Order Point Qty/Par Level is 25.

     

     

     

     

     

     

    Inventory control can also identify an Order-Up-To Level in order to determine the max stock level that Purchase Order Generator should use for replenishment. 

    How do I know what to buy?

    The planner/buyer must identify these values for the item on the Item Resource Planning Maintenance as well as some selection criteria for Purchase Order Generator.  Then, the item should be linked to one or more approved vendors with lead time, pricing and purchasing unit of measure.  Once this is complete, access Purchase Order Generator under the Purchasing>>Transactions section to view suggested purchase orders for items that have fallen below the Order Point Qty/Par Level.  These suggested purchase orders are easily converted into true purchase orders and emailed to vendor.

    For information on how to use Microsoft Dynamics GP Inventory Planning and Procurement contact [email protected]

    This article was written by Sunny Mattoon and was originally posted on the InterDyn – Remington Consulting blog, a Microsoft Gold Partner

    3 Responses to “Use Order Point Quantity (Par Level) to Keep the Right Stock On-Hand”

    1. SOFT4 says:

      Actually, there are much more problems and challenges with the inventory management… Check this presentation: http://www.slideshare.net/SOFT4/automating-inventory-management-manage-your-inventory-efficiently, hope it gives pretty god overview.

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