Inventory holding cost input

[former_member696146]

Hello Experts,

Kindly help me with my query.

I understand that inventory holding cost is a required input for IO run.My client does not have any inventory holding cost rate in the legacy system and instead of maintaining the same as empty, i am planning to maintain for all the product across all locations in my supply chain as "1" .My understanding is to maintain this value only for current period instead of all future periods in my planning horizon .Is this Ok ? Kindly help me understand as what is the standard process.Does it make any difference to the IO results if maintained for all the future periods or can i stop with maintaining only in my current period?

BR,

Praveen

[chris_topf · Accepted solution]

Hello Praveen,

you are correct, the IO operator uses the value in the current period. It may make sense to load it for several periods in advance, however, because as the weeks roll forward the current period changes and if you forget to load the data for a particular week, the results will be affected. If the holding cost is null it will be treated like it is 0, so you would generally see most or all of the safety stock being held at customer-facing stocking locations and little if any at the internal locations. Loading a holding cost of 1 for all product/locations is better, although ideally the holding cost increases as you get closer to the customer.

Regards,
Chris

[AyanBishnu · Accepted solution]

chris.topf till date the best and crux asnwer on this topic. Indeed holding cost will increase the more closer your holding location is to the customer.

[former_member696146 · Accepted solution]

Hello Chris,

Thank you very much.I was thinking to use CPI-DS to load the inventory holding cost automatically week on week.But i get your hint and probably load the data for three weeks or so for the current week and also proceed with the weekly CPI-DS job as well.Also one more question is on the inventory holding cost maintenance for the raw materials at supplier location.Does it make sense to load those as well ?Ideally,we do not care about any safety stock maintenance at vendor site and hence might not be needed.Your thoughts please.

BR,

Praveen

[chris_topf]

Hello Praveen,

when you are talking about raw materials at supplier location, are you talking about an external vendor? If so, IO does not calculate/manage anything at an external vendor. Otherwise I would suggest that you do not load cost for these locations and after running the IO operators check the results. You could always create a user scenario and add cost there to try some what-if scenarios.

Regards,
Chris

[former_member696146]

Hello Chris,

Thank you very much for the information.

BR,

Praveen