What is Reorder point planning?
Reorder point planning is a method used in supply chain management to determine when to place an order for replenishing inventory. The reorder point is the inventory level at which a new order should be placed to avoid stockouts. This planning method takes into consideration factors such as lead time, demand variability, and safety stock to ensure timely inventory replenishment.
Which materials could use reorder point planning?
The reorder point method is suitable for materials with a low value and frequent and stable daily consumption. It's easy to implement, easy to understand, simple and reliable. However, although this method is simple to implement and does not require much analysis and adjustment by the planner, it is still inevitable to encounter the question of what level is the most appropriate level for the reorder point. If the reorder point is set too low, then the frequent consumption of the material will face the risk of going out of stock if it encounters a slight fluctuation in demand, and if the reorder point is set too high, then the problem is that a lot of inventory funds are tied up, resulting in unnecessary inventory being stored in the warehouse. Therefore, companies need to consider a variety of factors when setting up reorder points to find the most suitable balance for them.
How to use reorder point planning in APO system
There are two PP/DS heuristic which could implement reorder planning.
SAP_PP_002 heuristic use “Reorder day’s Supply” field of product master to determine the replenishment quantity. This algorithm checks the sum stock and firmed receipt not fulfill the requirement within reorder days' supply, then create procurement proposal to cover the shortage. This algorithm defines its reorder point in terms of time dimension.
Master data: Reorder planning method is set to 2.
Original demand and supply before executing heuristic
Demand and supply after executing heuristic
SAP_PP_007 heuristic use “Reorder Point” of product master to determine the replenishment quantity. This This algorithm checks the sum stock and firmed receipt not fulfill the requirement which defined with “Reorder Point” , then create procurement proposal to cover the shortage. This algorithm defines its reorder point in terms of quantity dimension.
Master data: Reorder planning method is set to 1
Original demand and supply before executing heuristic
Demand and supply after executing heuristic
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