IC120 - Economic Order Quantity and Reorder Calculation
Run Economic Order Quantity and Reorder Calculation (IC120) to calculate
the reorder point (ROP) quantity and/or the economic order quantity (EOQ).
The ROP determines when to reorder and the EOQ determines how much toreorder.
To update the ROP, assign items to the variable (V) Reorder Point Code
defined in IC12.1 (Item Location) in the Reorder tab. To update the EOQ,assign
items to the economic (E) reorder quantity code in IC12.1 and define thecompany's
overall carrying cost percentage and ordering cost. You can run this report
to calculate reorder quantities for all items regardless of the reorder point
code and reorder quantity code.
**Processing Effect
The ROP calculation formula is:
[(annual usage x leadtime days) divided by 365] plus the safety stock
quantity.
The EOQ calculation formula is the square root of [(2 x annual usage
x ordering cost) divided by (carrying cost percentage x unit cost)].
The EOQ and ROP calculations can be based on transaction history or
a specified forecast period defined in IC19.1 (Forecasts) or both. Ifcalculated,
you have the option to update the EOQ and ROP values to Item Location records
defined in the IC12.1 (Item Location) Reorder tab.
This form also provides options for you to update these values to the
Item Location record and update the reorder quantity with the EOQ value.Otherwise,
you can edit this report and manually enter these values after you madeadjustments.
If the ROP is updated, you can calculate when to reorder based on this value
in IC140 (Vendor Reorder Advice) or IC225 (Inventory Reorder Advice).
In order for this program to recalculate the reorder point for an item
location record, you must have one of two situations set up ahead of time
as follows:
1. Enter either a number in the Sales, Issues Periods parameter of IC120 orenter a number in the Forecast Periods parameters of IC120.
2. Have a Forecast Number on your ITEMLOC record (set up in IC12).
This does not mean the program will calculate a reorder point with a non-zero
value, but without one of the two points above, no reorder point is calculated
for the item location.
**More Information
You can process items in this form by location, report group, and/or
inventory class. In addition, you can process only those item records with
an old value versus a new value difference greater than a specifiedpercentage.
If the reorder quantity is specified for update, you can choose to round up
the reorder quantity to the nearest order multiple. For example, if thereorder
quantity is 49 and the order multiple is 12, the program rounds the reorder
quantity to 60.
