3 Formulas for an Intelligent Replenishment System in MAS 500

Wednesday, March 10, 2010 by Jenny Lowry

The Sage MAS 500 replenishment module is a tool that helps in 3 areas:

• When to replenish a product
• How much you should order
• From whom you should order the item

The replenishment module uses many different formulas to predict the variables listed above. The replenishment tool gives suggestions for purchasing, but the user has the ultimate decision in what to buy.

Without going into detail of all the formulas that make up the replenishment values, I wanted to focus on 3 primary formulas that can be controlled by the user and form the basis of the replenishment calculations.

Daily Demand

This is the estimated daily demand of the item in the warehouse. This is calculated using the projected demand and the number of working days in a period. We can build different formulas for each item/warehouse combination. The demand formula is projecting future sales demand of the product using past sales history. We can also assign different weight factors for the analysis.

Projected Lead Time

This is the number of days to replenish the item. This can be calculated using the prior receipts from a primary vendor. This formula can also be weighted to help calculate an accurate lead time.

Safety Stock

This is the number of days you want to keep a quantity on hand. It is used for unexpected sales and potential delays in the receipt of items. For example, your safety stock formula may have a 5 day supply. The system calculates daily demand * 5.

There are other field values that are used in the final replenishment calculation than just the 3 above. Some of these are:

• Target order requirements from vendor
• Typical order cycle with a vendor. E.g. We do not want to run out of product if our typical order cycle with a vendor is 3 times a year.
• Trend percentages
• Replenishments costs
• Carrying costs

Putting these values together can create a very intelligent replenishment system if desired. Keep in mind, MAS 500 can also handle simple replenishment suggestions. If item A falls below 20, order to fill a maximum quantity. MAS 500 is flexible enough to handle a variety of replenishment needs.

By Jeff Steel, a Sage ERP software consultant for Socius.