How NetSuite reorder information is calculated

[Following is extracted from NetSuite SME email which provides another illustration on how reorder point is calculated]

NON-SEASON (Regular):

Lead Time + Safety Stock = Reorder Point
Reorder Point + Days Supply (or Order Cycle) = Preferred Stocking Level

• Order Cycle is defined as a global value (I don’t think we call it Order Cycle but that’s the standard nomenclature in WD) represented in terms of # of days supply. Think about this as how often do you want to be placing PO’s or how many turns are you trying to achieve.

Let’s say you want a 60 day Order Cycle, Average Lead Time is 7 days and you add a small buffer of 3 more days supply in the form of Safety Stock. Let’s also assume that based on this 60 day “look-back cycle (or audit period)” NetSuite identified the fact that you sold 240 units of product X. Therefore, your demand per day is 4 (240/60).

So, Reorder Point is 28 (7 x 4) + 12 (3 x 4) = 40 units.
Preferred Stocking Level is 40 + 240 (4 x 60) = 280

This is a very standard, yet simplistic way of identifying re-order points and stocking levels (we don’t handle lost sales, exceptional sales or backorder tolerance thresholds) but that’s the formula.

SEASON:

The formula is the same, but the difference is the audit period. Instead of counting back the last 60 days of sales to identify our daily demand rate, we instead go back 1 year from today (or whatever day the computer performs the forecast) and count FORWARD 60 days. Those 60 days become the audit period and then we calculate everything else based on the historical consumption during that audit period. Why do we do this? Because we want to see what our demand was – on this seasonal item – LAST SEASON. Counting back the last 60 days from today is irrelevant to seasonality that comes and goes every 3 months.

NetSuite Clinic in Singapore!

NetSuite will be having its first Singapore NetSuite Clinic!

Details as follows:

DATE: Thursday June 18, 2009

VENUE: Singapore Management University (SMU), School of Economics & Social Sciences
Level 5, Seminar room 5.1, 90 Stamford Road, Singapore 178903

AGENDA:
1:30 – 2:00 pm Registration
2:00 – 2:15 pm Welcome and Introductions
2:15 – 3:00 pm Introduction to NetSuite
3:00 – 4:00 pm Live NetSuite Product Demo
4:00 – 5:00 pm Networking Reception


Refreshments will be provided. This is a free event, but space is limited; please register in advance.

Please contact NetSuite at +65 6511 6130 if you are interested.

Don't miss it!

NetSuite Clinics in Manila!

NetSuite had another round of NetSuite Clinics in their Manila Office (RCBC Plaza in Makati) last 9 and 10 June.

While there was a street rally in the heart of the CBD, Prospects and Partners braved through the traffic jam to participate in a great open forum and networking session. Lunch was served to all participants.

Look out for the next one!