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WhitePaper - Ordering Considerat

The Activant offers many different ways that the system will consider how to reorder.  Although we’re showing Network Access screens in this demonstration, the functionality is the same under E4W (Eagle for Windows).  All E4W allows are some additional data capabilities which don’t have any crucial impact in the ordering rules, or in the data being passed for conversions (MSU’s, or Multiple Selling Units, for example).

As a rule, when the Activant transmits a P.O. to a Primary Vendor, the PURCHASING unit of measure is what is transmitted for a quantity.  If a retailer maintains a stocking unit of measure and a purchasing unit of measure that differs (i.e. - a 250’ spool of wire, where the stocking UM is the LF (Lineal Foot) and the Purchasing UM is the RL (Roll), and if the Order Multiple is 250, then the system knows to transmit to the Vendor a order quantity of 1 RL, as opposed to 250 LF.  The system may suggest an order quantity of 250 LF, but realizes that the order will be placed in the purchasing UM.  Of course, if the item is not set-up correctly, the retailer may see 250 rolls…

This first screen shown above is the Stocking Screen for function IMU (Item Master Update).  The fields that would be very pertinent to ordering (irrespective of the qty on hand, qty on order, future order, customer backorder or committed qty) are:

Maximum Stock Level - When used in conjunction with the Order Point, this creates the MIN MAX environment.  The Maximum stock field must be input by a user manually, and may be a consideration of available space.  The function to recalculate the Reorder Point (see below) can OPTIONALLY adjust this field, either by the percentage of change made upon the Reorder Point, or by the absolute amount of any calculated change to the Reorder Point.

Order Point - This is either calculated by the system through the use of function ROP (Report Order Point) or can be input manually.  If the user doesn’t execute ROP or manually change this field, the value will remain unchanged.  However, if a user has input this field in conjunction with the “Maximum Stock Level”, then the user has employed Min/Max for reordering.  If there is only an Order Point, then when the Available Quantity (QOH-Committed Qty + Quantity on Order) falls BELOW the Order Point, then the system will “suggest” the user reorder it, and take into consideration either the Order Multiple (the minimum quantity a user can order typically from distribution) or the Standard Pack (typically associated with the Manufacturer - the minimum quantity of an item that could be reordered from the Manufacturer).

New Order Quantity - In the contxt of the Activant’s Suggested Reordering system, a user can elect to merely suggest an order, and NOT build a Purchase Order, OR, Suggest an order and have the system fill in the New Order Quantity field (which can then later be “converted” to a Purchase Order, OR, create a “Temporary” Purchase Order, which can then later be “converted” into an actual Purchase Order (but there is no visibility on the inventory record that there is a quantity on order until the temporary P.O. is converted to a status “F” P.O., which then updates the Quantity on Order), OR, the user can have the suggested order directly create a status “F” P.O.  It’s a matter of user preference insofar as how a suggested order ultimately becomes status “F” (finalized) P.O. 

Safety Stock - When the Activant recalculates an Order Point, this amount is added to the calculated Order point, primarily to provide for display items which one would want to include in an Inventory Valuation report.  For example, you have a 7 ¼” circular saw that you have one on display, and when the system recalculates a reorder point, it determines that based on the weeks of supply strategy, the reorder point would be 2.

If you set a safety stock amount of one, then you would have a reorder point of 3, which would then permit you to always maintain the one for display purposes, and two that could be sold from their original packaging.

Min O/P - Minimum Order Point -  In this case, if this field is used, then regardless of what a calculated reorder point would be, the reorder point would always be what is set into this field.  This could be the case where, for example, you would always want to maintain a minimum order point of 4 in the case of casters, where the customer would always be likely to want to buy 4 of the casters to complete a job.

Stocking and Purchasing Unit (of measure) - As mentioned above, when the Activant transmits a purchase order, it always sends the quantity in a purchasing unit of measure.  When these fields differ, AND when there is an order multiple (as is the case with wire, rope and chain where the Stocking U/M is the LF (Lineal Foot) and the Purchase U/M is the EA or RL, then the Activant knows that if stocking quantity being ordered is 250, for example, to transmit a Purchase U/M of 1 (EA or RL) so that only 1 Purchase U/M is what is desired, rather than 250.  However, this ONLY works if the Stocking U/M and the Purchase U/M differ as in the preceding example.  There is still an issue insofar as many distributors are concerned however in the conversion of the Purchase U/M cost to the Stocking U/M cost, and in many cases, the cost used in calculations for cost of goods and inventory valuation may still be in the Purchase U/M cost value unless manually manipulated by the user.

Purchasing Conversion Factor and Purchasing Decimal Place - These fields are used primarily for Lumber and other Building Materials Items, where the item cost Pricing Unit of Measure is different from the Stocking Unit of Measure (i.e.; MF (Thousand Board Feet to Piece conversions).  Basically, the Activant takes the cost and moves the decimal to the left by the number of places specified by the purchasing decimal place, then multiplies the result by the purchasing conversion factor to arrive at an each cost - i.e.: $450/MF = .45/BF x 5.3333 (the conversion factor for a 2” x 4” x 8’ piece of dimensional lumber) to arrive at a PC (piece) cost of $2.40.  To have these fields be active, the user must have purchased what Activant refers to as “The Lumber Package”, AND the Record Type must be set to “L” (Lumber) as opposed to “H” (Hardware) - the default.

Order Indicator - This field can be used in conjunction with the Suggested Reorder process.   The options for this field are preset.  The first option is “D”, which means that even if an item is available through the distributor, the retailer ONLY wants to have it ordered as a “D”rop ship item from the manufacturer (think National).  The retailer could MANUALLY add this item to a purchase order for the distributor, if desired, but the item will not appear on a suggested reorder for the distributor.  Conversely, a “W” in this field means that the item will only appear on a suggested reorder for a distributor, and if the suggested order is run for the the Manufacturer, the item will not appear.  If there is an “S” in this field, that indicates “S”pecial Order only.  That may be for an item that the retailer has purchased as a special order for a customer, and wants to have the history for the item, but does not ever want it to appear on a suggested order regardless of if the item was bought through distribution or direct.  This field is also used for Tally (“T”) items - the “T” indicates that the item is a tally “parent”, and as such excludes it from sales reports.  The opposite of that is “C”omponent, and those records which are “attached” to the parent tally record will be counted in sales and valuation reports.

Seasonal/Promo Order Only - this is used again as an exclusionary code for items, so if for example one doesn’t want to suggest the reordering of items bought for Promotion(s) exclusively, then a “P” could be put into this field.  The user would have to actively tell the system to exclude those items in the course of suggesting an order.  If the user indicates an “S”, then they could potentially include or exclude seasonal items (this would normally be done in conjunction with the Seasonal Sales Code, which is defined on the “C”odes screen of an item - shown on the next page - it’s typical to minimally use “S”ummer and “W”inter and thus in summer, exclude “W” and in winter, exclude “S”).

This is the “C”odes screen.  While not many fields are used here in conjunction with ordering, there is an ability to utilize some which can be very crucial.

User Codes and Expanded Codes A, B, C & D - Each of these 20 fields is mutually exclusive, meaning that for example an “A” used in the third position of the User Code field bears no relation to an “A” potentially in the fourth position.  Activant users can include or exclude from any report an item with or without a particular code, providing a great deal of flexibility.  It would behoove anyone attempting a conversion of data to determine if these fields are in use in conjunction with ordering or reporting, and in what way so as to not remove what might be a crucial capability for the user.  The uses of the codes are as unique as the individual user, so care and consideration must be given to these fields.  Many times, users will define weeks of supply strategies (Reorder Point Calculations) employing a combination of Popularity calculations (which can write to a specified position in any of the 5 fields) with some other considerations (only reorder items with a “Z” in the second position of Expanded Code “C”).  Careful…

Popularity Code - Populated by the use of the Product Analysis report, allowing a user to perform an analysis on items based on their unit sales, dollar sales, gross margin dollars, gross profit percentage, their on-hand value or the items YTD transactions.

The Product Analysis report, as noted previously can be used to update either this field, or any of the user code fields, as well as the Expanded user codes when used in conjunction with the Item Code Update function (RICU).

Seasonal Sales Code - as discussed previously, this field can be used so as to, for example, when an item is coded with a “W” for winter, have winter items excluded in summer, and “S” excluded in winter.

Keep Stock Info & Keep Prices - These fields are in many cases used for what may be in some cases Generic SKU’s so as to allow a retailer to sell an otherwise unidentifiable item at Point of Sale (a SKU “P”, for Plumbing, for example, or “NBS”, for bulk nuts, bolts and screws).  Since the quantity on hand is not maintained for an item with Keep Stock Info = “N”, the item doesn’t appear on inventory valuation reports or if QOH < 0 reports are run, and likewise, for Keep Prices = “N” items, the cost and/or retail used for purchasing or selling an item are not maintained and the user is always prompted to a price when selling the item.  A desired GP% can be set for the item, so, for example, when an item is sold at a $1.00 retail with a 40% Desired Gross Profit, the system will calculate a cost of goods sold of $.60, and a margin of $.40.

Count Promo Sales - if this field is set to “N”, then the sales history of the item sold while on Promotion will NOT be considered as part of the “normal” sales history for an item, and hence if the items sales spike while on Promotion, the reorder point will not spike in parallel.  The user has the option then to include or exclude promotional sales history when recalculating reorder points.

Vendor Backorder - when creating a Purchase Order, the user has the ability to determine if the terms for the order are ship/cancel OR ship/backorder.  When Ship/Cancel is used, then the retailer MUST reorder the item on their next P.O. if they still need it.  If Ship Backorder is used on the P.O., then the system will maintain as still on order the item UNLESS this flag on the item is set to an “N”.

Print Labels - This field has relevance to the purchasing system since the Activant can print Price and/or Bin labels for a particular P.O., when there is a change to the retail price which may be reflected on the P.O.  The choices are “Y”es, “N”o, “B”in labels only, “P”rice labels only, “Q” for price labels WITHOUT prices, but bin labels WITH prices, “Z” for both bin AND price labels WITHOUT prices, and “1”, for one price label only regardless of the quantity ordered.

Discontinued - this field, if set to “Y” (which can either be done by the user, or by Electronic File Maintenance) will exclude an item from ever being reordered through a suggested reorder.

Also of note - there is sometimes data relevant to an inventory record which may be contained in an Alternate Part Number file and/or on the “V”endor screen in an inventory record.  Minimally, the Alternate Part Number file allows a retailer to have an item SKU like “WWF”, for Windshield Washer Fluid, which, when ordered through distribution would never be recognized.  The alternate part number file allows the retailer to cross-reference an unlimited amount of item numbers to an item like this, if, for example, they buy the item through primary as well as secondary distribution.  The retailer has the option of simply maintaining the cross reference to the distributors item number, OR when used in the Item Master “V”endor screen, maintain the distributor(s) costs and order multiples.  If the vendor accepts electronic P.O. transmission (or EDI), then the Activant searches the alternate part number file to see if a cross reference exists prior to transmitting the P.O. line to the vendor.

Following on the next page are the initialization screens for the Reorder Point calculations and the Suggested Order.  These are provided for your information.

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