Using the Item Warehouse
Entry (IWE) screen, a warehouse manager specifies controls that help him
or her to know when to reorder an item. Based on these controls, the NCAS
notifies the warehouse manager when recorded inventory levels for an item
fall below required levels. The NCAS uses one of the following inventory
controls to calculate the reorder point for inventory items:
Order Point (O): The
order point is the quantity specified by the warehouse manager as
the point at which the item should be reordered. If the available stock
level reaches or falls below the order point quantity, the NCAS notifies
the warehouse manager to reorder the item via the Replenishment Action
When the inventory control
is O, the warehouse manager must also specify the quantity of stock to
be reordered. The warehouse manager can use either a fixed order quantity
or an economic order quantity to specify the quantity of stock to be reordered.
The fixed order quantity
requires the warehouse manager to specify the amount of the item that should
be ordered each time the available stock level falls to the order point.
The fixed order quantity can be of two types: absolute or time supply.
With the absolute quantity, the warehouse manager specifies a specific
number of items to be ordered. With the time supply quantity, the
order quantity is specified as a number of daysí supply. If the order quantity
is specified in daysí supply, the NCAS calculates the quantity based upon
the itemís demand history.
If the warehouse manager
selects the economic (calculated) order quantity, the NCAS calculates
the optimal order quantity for the item based on minimizing the acquisition
and carrying costs of the item.
For each of the above controls,
with the exception of the external inventory control code, the NCAS calculates
the timing and quantity of replenishment for each item at each warehouse.
If auto-requisitioning is selected on the Item Warehouse Entry (IWE) screen,
the NCAS automatically generates a requisition for the calculated quantity
when it is time to reorder. If auto-requisitioning is not selected, the
NCAS generates the Replenishment Action Report (RRACT) to advise
the warehouse manager to create the required requisition. The NCAS does
not calculate the timing and amount of replenishment when the external
inventory control code is selected because it will be manually generated.
Computed Order Point (C):
The computed order point control is similar to the order point control.
However, instead of using a fixed order point to determine when an item
should be reordered, the NCAS uses the safety stock level, lead time, and
forecasted monthly demand to calculate the order point. The safety stock
level is the amount of cushion in units or in time for the item at
the reorder point. The amount of cushion in time refers to the number of
days that the current on-hand supply of an item will last. The lead
time is the number of days from the time a purchase order is created
until the goods are received at the warehouse.
If the NCAS determines that
an item with the computed order point control needs to be replenished,
the item will appear on the Replenishment Action Report (RRACT).
The minimum/maximum control specifies the point at which an item should
be reordered (minimum stocking level) and a reorder quantity ceiling (maximum
stocking level). The NCAS uses the order point (minimum stocking level),
inventory standard (maximum stocking level), and order multiple to determine
the order quantity.
When inventory levels for an
item fall below the minimum, as designated by the value in the ORDER POINT
field, the NCAS will notify the warehouse manager that replenishment should
The inventory standard
is the ceiling or maximum inventory level permitted for that item at that
warehouse. In other words, replenishment should not exceed the inventory
The order multiple is
the multiple in which an order for an item should be placed. For example,
a vendor only sells scissors by the dozen. Therefore, the buyer may only
buy the scissors in multiples of 12. The buyer may buy 12, 24, 36, or 48
(and so on) pairs of scissors.
When the minimum/maximum
control is selected, the NCAS does not allow an order that causes inventory
to exceed the established inventory standard or maximum quantity. This
is known as a maximum exception. In this case, the warehouse manager receives
a warning message from the system. If this message is ignored, the order
in question will be rerouted to a special warehouse approver to get approval
to exceed the inventory standard.
In contrast, a minimum exception
occurs when the inventory level of an item drops to or below the order
point. When this occurs, the item will appear on the Replenishment Action
Report (RRACT). This report notifies the warehouse manager that it
is time to replenish the item.
External (E): When the
external control is utilized, the NCAS does not advise the warehouse manager
when to initiate replenishment. The warehouse manager must complete this
function manually. The warehouse manager may use some method external to
the NCAS to determine when he or she should initiate replenishment of the