To many people in charge of warehousing, there is a clear distinction between store and distribution centre (DC) order management.
Retail stores sell goods to end customers. Distribution centres typically transport inventory to warehouses and stores, or in some cases to end customers (usually, to wholesale buyers). That is why retail stores enjoy more variable and more representational statistics. To avoid bullwhip effect which is caused by the overreacting to demand and leads to unmanaged inventory, retailers shall keep supply chain and demand data accuracy. Distribution centres can help, as they effectively consolidate demand.
Retailers require DCs to manually track consolidated demand data and to ship items between multiple locations. If you have ABM Inventory system installed, there is no need to control data by hand, as it automatically collects real-time data and intelligently reacts to any demand fluctuations.
The purchase of inventory from external supplier shall be based on the current in-store demand and inventory data. To activate this feature, you need to choose DFO - demand focused order in warehouse settings.
Unlike DBM buffer which is commonly used in stores, the Demand focused order (DFO) can be used for fast-moving active MTS goods on a daily basis. The DFO can be zero-low if you have sufficient inventory level in your supply chain.
ADU (Average daily usage) indicator plays an important role in DFO buffer calculation. To calculate the Average daily usage one must use sales history across all warehouses/stores/retail locations within 14 days. Importantly, there are 2 conditions to meet to deem this period valid:
- the inventory was not considered in other coverage days calculations;
- inventory leftover and sales turnover rate are above zero.
The ADU calculation uses a moving weighted average method, and each of 14 days has its own weight factor. This allows the system to consider the most recent sales and demand.
Average Daily Usage per good
To calculate inventory buffer and a corresponding DC order quantity, one must find out the demand for each warehouse, store and sales point which are included into DC facility. To make this calculation accurate, each sales point shall consider the current level of stock, needed to be reordered before reaching safety buffer, and the forecasted level of sales before the next delivery from the DC, as well as existing or future promotions.
Apart from active MTS-goods, inactive MTS goods or MTO goods having a reserve, shall be considered.
The system takes into account the schedule of goods dispatch from the DC, makes correct reorder calculations and links accuracy with inventory levels, preventing overstock.
Each store must calculate the promotional and non-promotional period (in days) for each product during the interval between a current date and the maximum expected date of delivery from a DC. Multipliers are applied for promotional periods.
Sometimes the regular order includes safety stock or extra inventory to satisfy one time demand.
Safety stock (or Safety Buffer) can be manually set in absolute amount (directly in the system interface), or exported from inventory management system. The ABM Inventory system can automatically calculate the safety buffer by analyzing sales history for all supply chain elements, DC delivery profile and the set multiplier. The multiplier can be set for both the warehouse in general and each of suppliers. This is made to have sufficient safety stock. In case a supplier fails to meet delivery terms for one order, the store will have enough safety stock to cover sales during one inventory delivery period.
Each Distribution centre order created in the system has basic and additional parameters available to system users. In addition to standard parameters, the user can view and edit the following: total safety stock quantity for all sales points; total stock leftovers and leftovers not including the excess stock; total ADU for all sales points; demand not adjusted to packaging.
The system also allows viewing more detailed information on each order: system users can log in to order calculations block and analyze each product data.
In case order parameters are changed, the order quantity can be recalculated with the help of Refresh order function, available in order edit window.
Each order has information on total products weight, cost, volume and number. Users can manually add or delete order positions, change delivery date and adjust the order for the weight/volume/number/cost necessary.