Maintaining PeopleSoft Inventory Policy Planning Control Groups

This chapter provides an overview of inventory policy control groups and discusses how to:

Create and maintain policy control groups.
Inherit policy controls.

Understanding Inventory Policy Control Groups

A policy control group contains reorder and stocking policies the system uses as default values. PeopleSoft Inventory Policy Planning applies the policy information automatically to all of the items that are linked to the control group when other data is not available for the policy item. The system also uses the default values when it creates policy items.

Any policy item that is contained in the policy set can have its own explicit control parameters or have the parameters contained in a control group automatically assigned to it. Also, you can override default values that are provided by control groups when you maintain policy items.

Before you set up policy control groups, analyze the policy items and group them for control purposes. ABC analysis provides a tool for identifying those items that will make the largest impact on the firm's overall inventory cost performance when improved inventory control procedures are implemented. Improvements in forecasting or careful analysis of order quantity and timing decisions for A items provide larger improvements in inventory cost performance than similar efforts on the C items. This type of analysis is useful in improving inventory performance.

In an ABC analysis, A items are controlled by more stringent parameters and demand a higher level of involvement in all phases of the inventory policy planning process. B and C items generally have less stringent parameters and allow the system to handle a wider range of situations automatically.

To analyze and group policy items:

Perform an analysis (ABC or another method) to generate an initial item classification.

You can further refine the classification to identify exceptions or subgroups.
Analyze the initial groups that you created in the analysis and identify situations or subgroups that require special parameters.
Set up a separate inventory policy control group for each group of items.
Decide which calculation types, methods and arguments, and other controls that you want to use for each group.

This step physically establishes the set of policies and arguments that the system uses to calculate the inventory policy for each item.

You can calculate inventory policies by selecting from several types of calculations. You can use one type or a combination of types to arrive at the inventory policy. Most calculation types have a variety of methods and arguments that you can apply to the policy. Calculation types include:

Static calculation.

Provides calculations to arrive at fixed values for systems that recognize only a single, fixed value for each parameter. Using static calculation parameters that you provide, the system calculates a single value from the time-phased results for export to third-party inventory control systems.
Order policy.

Calculates replenishment order quantities for a policy item. Order policy limits determine the system settings for reasonable high- and low-order quantity limits for a policy item. Establish these values on the Policy page.
Safety stock.

Defines safety-stock policies that meet customer-service requirements and arrives at an inventory policy with planned safety-stock levels.
Reorder point.

Determines when the system launches a replenishment order for an item.
Minimum and maximum quantity.

Provides warnings when inventory levels reach the minimum or maximum quantities that you establish for an item.
Historical use calculation.

Bases the safety-stock level on demand history. For example, you can set the policy at the level of maximum usage that is likely to occur during the item's purchase lead time.

Creating and Maintaining Policy Control Groups

To define policy controls, use the Policy Controls component.

This section provides an overview of policy group usage and discusses how to:

Define control group utilization attributes and static calculation parameters.
Define policies for control groups.
Set control group cost and order details.
Manage control group messages.

Policy Group Usage

You can divide policy control groups into:

Policy controls that determine utilization and static calculation periods for the control group.
Policy definition that defines reorder and stocking policies for an item.
Other data that includes cost and order details and the method for calculation historical use of the item.

You can change information that is associated with a policy control group at any time; however, the system doesn't use it until you generate a policy in PeopleSoft Inventory Policy Planning. When you delete a policy control group, the information is no longer available, and you must reenter it if you need it again.

Pages Used to Create and Maintain Policy Control Groups

Page Name	Object Name	Navigation	Usage
Define Control Groups	DP_POLICYCTRLS	Inventory Policy Planning, Define Policy Elements, Control Groups, Define	Define control group utilization attributes and static calculation parameters. You must set up at least one policy set and establish it as a default value before you create a control group.
Policy	DP_POLCTRLS_2	Inventory Policy Planning, Define Policy Elements, Control Groups, Define, Policy	Define policies for control groups.
Other Data	DP_POLCTRLS_3	Inventory Policy Planning, Define Policy Elements, Control Groups, Define, Other Data	Set control group cost and order details and set up the historical calculation method for the control group.
Work Queue	DP_POLCTRLS_4	Inventory Policy Planning, Define Policy Elements, Control Groups, Define, Work Queue	Manage control group messages that produce alerts, which the system generates for a specific control group.
Copy Control Group	DP_COPYPOLCTRLGRPS	Inventory Policy Planning, Define Policy Elements, Control Groups, Copy	Create new policy control groups by copying attributes from existing groups.
Delete Policy Control Groups	DP_DELPOLICYCTRLS	Inventory Policy Planning, Process Deletions, Policy Control Groups	Delete control groups from the policy planning system.

Defining Control Group Utilization Attributes and Static Calculation Parameters

Access the Define Control Groups page.

Utilization Group	Select a group with which you want this control group associated. Utilization groups are used to group items together for cycle counting or planning purposes.
Utilization Type	Select a type with which you want this control group associated. Utilization types classify inventory items based on demand and usage. By using this field, you can assign an ABC code to the control group.

Note. If the Uses Inventory check box is selected for the policy set associated with the control group, then the system displays a drop-down list box for the Utilization Group and Utilization Type fields. From this drop-down list box, you can select values that were created in PeopleSoft Inventory. If the Uses Inventory check box is not selected, then the system displays a text box for the Utilization Group and Utilization Type fields.

Static Calculation Method

Use to indicate how the fixed inventory policy is to be calculated for this control group. The system recalculates static inventory values each time it generates a policy using these arguments.

See Understanding Inventory Policy Control Groups.

Period Number	Select to indicate that the static policy equals the time-phased policy for the current year's period number that you enter in the corresponding Dynamic Period field.
Dynamic Period	Enter the period number from which you want the system to use values to calculate the static policy. This is the number of a period from the current year's periods.
Periods to Average	Select to have the system calculate the static policy by averaging a number of periods. The system sets the static policy equal to the weighted average time-phased policy over the next number of periods that you define in the Periods to Average field.
Periods to Average	Enter the number of periods that you want the system to average when it calculates the static policy. The periods for averaging begin with the current period and go forward in time for the number of periods that you enter.

Defining Policies for Control Groups

Access the Policy page.

The system uses the values that you enter on this page in conjunction with each other to define an overall inventory control policy for the policy set. You can define parameters for each stocking policy or for specific policies. If you don't want to use a certain type of policy, select None as its method.

Selections that you make on this page determine which calculations the system uses. You can override the parameters that you define on this page for specific policy items using the Define Policy Items feature.

Order Policy

Controls how the system calculates quantities for replenishing inventory items belonging to the policy set that you selected. The order limit method determines the system settings for reasonable high and low order quantity limits for a policy item. If you enter a value in the Argument field and the order method does not require an argument, the system removes the value when you save the policy.

This table describes order policy fields and associated values:

Order Method	Argument	Limits
Days Supply: Orders a certain number of days' supply of this item.	Enter the number of forecast days to use. Arguments are the values that the system uses to make calculations.	Places upper and lower limits on the reorder quantity. The system bases the quantity on the number of days that you enter. Select Days Supply and use the Upper and Lower fields to enter the greatest and the least number of forecast days to use in the calculation. If you select None, the system does not place limits on the order.
Economic Order Quantity: Uses factors such as period demand, carrying costs, and order cost to determine the order quantity.	Doesn't use an argument.	NA
Fixed Quantity: Orders a fixed quantity for an item.	Enter an explicit reorder quantity as the argument. The value that you enter is in the inventory item's unit of measure (UOM).	Places upper and lower limits on the reorder quantity. The system bases the quantity on the fixed value that you enter. The system makes the calculation so that it does not order any more or less than the fixed quantity that you specify in the Upper and Lower limit fields. If you select None, the system does not place limits on the order.
Lot for Lot: Orders exactly what is needed to satisfy the immediate requirements (demand) for the lead time. Basically the system orders enough to meet the current day's demand plus enough to cover demand during the lead-time days.	Enter the current demand quantity plus the lead-time quantity.	NA
None: Doesn't use the order quantity method.	Doesn't use an argument.	NA

Safety Stock Policy

Defines safety stock policies that meet customer-service requirements and arrives at planned safety-stock levels.

This table describes the methods and arguments for safety-stock calculations:

Safety Stock Method	Argument	Limits
% Cycles Without Shortages (percentage of cycles without shortages): Sets the safety-stock level so that a percentage of inventory cycles can occur without creating a shortage.	Enter the percentage of cycles without shortages that you want the system to use in calculating safety stock. Arguments are the values that the system uses to make calculations.	If you enter a value in the Limits field, the system ignores it during policy processing.
Days Supply: Defines a specific number of days of forecast demand for an item.	Enter the number of forecast days that you want the system to use to calculate safety stock.	Select Days Supply to calculate the safety-stock level so that it is not more than the number of days supply in the Upper field and not less than the value in the Lower field. Select None to place no limits on safety stock.
Fixed Quantity: Keeps safety stock at a fixed level for an item.	Enter an explicit safety-stock level.	Select Fixed Quantity to have the system calculate safety stock so that it isn't more than the fixed value that you enter in the Upper field or less than the value that you enter in Lower field. If you select None, the system does not place limits on the safety stock.
Maximum Lead Time Usage: Bases the safety-stock level on demand history. The level is set to the maximum usage that is likely to occur during the item's purchase lead time. To determine the manner in which the usage is calculated, use the Historical Usage Calc Method (historical usage calculation method) field on the Other Data page. Normally you use this method when the demand for an item is low or intermittent, but sufficient stock must always be available. Note. The system calculates maximum lead-time usage only during the transfer of forecast information to PeopleSoft Inventory Policy Planning. Thus, a change in the method by which the system calculates the maximum lead time for an inventory policy item doesn't take effect until the next time that you transfer a forecast.	Doesn't use an argument.	NA
None: The system doesn't calculate for safety stock.	Doesn't use an argument.	NA
Percentage Demand Fill: Sets the safety-stock level to a particular service level that prevents running out of inventory.	Enter the service-level percentage.	NA

Reorder Point Policy

Determines the policy item inventory level at which to launch a replenishment order. Select a reorder point method to indicate how the system should calculate the reorder point for a policy item. Most methods have an associated argument.

This table describes reorder point methods and their arguments:

Reorder Point Method	Description	Argument
Days Supply	Calculates the reorder point as a specific number of days supply of this item's forecast.	Enter the number of days in the Argument field.
Fixed Quantity	Calculates the reorder point as a fixed quantity. When inventory drops to this value, you initiate replenishment action.	Enter the fixed quantity in the Argument field.
Lead Time + Safety Stock	Calculates the reorder point as the quantity that is required to meet forecasted demand over the vendor lead time plus the safety stock of the item.	Doesn't use an argument.
Lead Time Demand	Calculates the reorder point as the quantity that is required to meet the current demand plus the quantity that is required during the lead time.	Doesn't use an argument.
None	The system doesn't use a reorder point calculation.	Doesn't use an argument.

Minimum/Maximum Policy

The Minimum/Maximum policy establishes and monitors the quantities of an item. This policy doesn't physically control the level of inventory; it only issues warnings when the policy violates the upper or lower inventory quantity limits that you establish. You can establish either a maximum or a minimum on both policies' levels using this group box.

This table describes the use of minimum values and their arguments:

Minimum Method Field Value	Argument Field Use
Days Supply: The minimum inventory level is of a sufficient quantity to cover a specified number of days of forecasted demand for this item.	The minimum number of forecast days to use before replenishing inventory.
Fixed Quantity: The minimum inventory level is a specific quantity of the item's inventory.	This is an explicit minimum quantity.
None: Minimum inventory is not required.	NA
Safety Stock: Bases the minimum quantity on the safety stock policy's quantity for the item.	You don't enter an argument. The system calculates the minimum value during policy generation.

This table describes the use of maximum values and their arguments:

Maximum Method Field Value	Argument Field Use
Days Supply: The maximum inventory level is of a sufficient quantity to cover a specified number of days of forecasted demand for this item.	The maximum number of forecast days to use before replenishing inventory.
Fixed Quantity: The maximum inventory level is a specific quantity of the item's inventory.	This is an explicit maximum quantity.
None: Maximum inventory is not required.	NA
Safety Stock + Order Quantity: Bases the maximum quantity on the safety stock policy for the item plus the order quantity policy value.	You don't enter an argument. The system calculates the maximum value during policy generation.

Setting Control Group Cost and Order Details

Access the Other Data page.

Historical Usage Method	Select the method for calculating historical usage. The system requires this field if you set either the safety stock or the minimum method to use the maximum lead time method. Based on a review of the historical demand over the number of effective historical periods, the safety stock or minimum is set to a constant value (the same for all periods). The forecasting view determines the effective periods. Values are: Lead Time Daily Usage (lead time estimated daily usage): The system prorates the historical demand on a daily basis and then multiplies it by the number of days of lead time for each effective historical period. The system then uses the maximum period value as the safety stock or minimum stock level. You use this method for items that have a steady demand pattern throughout each period. Lead Time Period Usage: Rounds the purchase lead time up to a specified number of periods. The system calculates the historical demand as the maximum usage during these periods and sets the safety stock or minimum stock level to this value. You use this method for items with few demand instances for each period. Maximum Possible Usage: Rounds the purchase lead time up to a specified number of periods and adds an additional period. The system calculates historical demand as the maximum usage during these periods and sets the safety stock or minimum stock level to this value. You use this method for items that have sporadic, low levels of demand. Static: The system uses the data that you enter in the Argument field as the maximum lead time usage; it performs no more calculations. You can override this value using Define Policy Items. See Defining Other Data for Policy Items.
Order Cost	Enter the cost of placing and executing an order for the items that are included in this policy control group. The system assumes that ordering costs include all aspects of ordering, including administrative costs, handling, and quality-control costs.
Carrying Cost % (carrying cost percentage)	Enter the percentage cost that is associated with holding a dollar of inventory for one year. The system applies this percentage to the standard cost of each item in the group.
Lead Time	Enter the standard lead time for items in this policy group. This is the time taken to replenish a policy item from its source, such as a vendor, supplying location, or manufacturer. Lead time begins when a replenishment need is identified and ends when the item is available for shipping. The time frame includes order review, approval, and launch; vendor administration time; vendor dispatch, transit, or manufacturing lead time; receiving; quality assurance; and putaway. The default value is 1.
Lead Time UOM (lead time unit of measure)	Displays the DAY UOM. The system measures lead time in days only.
Order Multiples	Enter the item quantity to which the system should round when placing an order. Order multiples are the number of units of an item that you include in an order. The system compares calculated order quantities to the order multiple and rounds up to an integer when you use the order policy calculation type. The system makes the comparison when it generates the order quantity during policy processing.

Managing Control Group Messages

Access the Work Queue page.

Work Queue messages are system-defined messages that produce alerts when exceptions occur during the generation of inventory policies. The system produces the alerts when errors, warnings, or changes in an item's status occur. Messages are static in nature while alerts are dynamic.

On this page, you can override default values for messages to indicate for the system not to use a message for the control group with which you are working. For example, you can remove a message at levels of the view where the message is not relevant or when you are in a start-up mode and don't want to see messages for all new policy items in the set.

The system creates alerts during policy generation. When you select Record Error, the system places alerts for items in this control group in the Work Queue. If you clear the check box, the system doesn't include the alerts in the Work Queue. When copying a control group within a policy set, the system carries the message settings to the copied control group.

Inheriting Policy Controls

Policy control inheritance is the process of having the system automatically assign reorder and stocking policies to items in a policy set that are associated with a control group. You can assign policies for one or all policy controls to multiple items that belong to a specific control group. You can also indicate for items to inherit all or certain details of an inventory policy that is defined for a control group.

These standards apply to inheriting policies:

The system inherits policy controls for any item in the policy set that you select using the Inherit Policy check box on the Inherit Policy Master page.
You assign items to control groups individually.

You can assign an item only to a single control group.
The system assigns policy controls to items when you use the Update/Inherit process (DP_IPINHERIT) to update items.

This section discusses how to set up and update inheritance controls.

Page Used to Inherit Policy Controls

Page Name	Object Name	Navigation	Usage
Inherit Policy Master	DP_INHERIT_POL	Inventory Policy Planning, Define Policy Elements, Control Groups, Update/Inherit	Set up and update inheritance controls for items that belong to a control group. Values entered on this page determine which policy items—and which fields within those policy items—the system updates, by using default values that are assigned to the control group.

Setting Up and Updating Inheritance Controls

Access the Inherit Policy Master page.

The policies that you select for inheritance become effective when you run the Update/Inherit process but don't appear in calculated values until you generate a new inventory policy.

Items to Inherit

Inherit All

Select to inherit all policy controls that are associated with items in this policy set. The system applies all values that are defined for the control group to all items in the policy set that use this control group, regardless of the setting of the Inherit Controls check box on the IP Master page. The system also bases inheritance on the policy details that you select in the Policy Details to Inherit group box.

Inherit Only

Select to inherit only those policy items that have Inherit Controls check boxes selected on the IP Master page. The system also bases inheritance on the policy details that you select in the Policy Details to Inherit group box.

Policy Details to Inherit

Use this group box to indicate which policy details you want items in this policy control group to inherit. You can select any combination of details or none at all.

Order Policy	Select to inherit order policy values for all items in this policy control group. The order policy controls how the system calculates quantities for replenishing inventory items. The order limit method determines the system settings for reasonable high and low order quantity limits for a policy item.
Lead Time	Select to have items in this policy control group inherit the lead time values that are established for the control group. This is the time it takes to replenish a policy item from its source, such as a vendor, supplying location, or manufacturer.
Safety Stock Policy	Select to have items that are associated with this policy control group inherit safety-stock values that are defined for the group. Define these values, such as a fixed quantity or a percentage of demand fill, on the control group's Policy page.
Order Multiple	Select to update items in this policy control group with data from the Other Data page. Order multiples are the number of item units that you include in an order. The system compares calculated order quantities to the order multiple and rounds up to an integer when you use the order policy calculation type.
Reorder Point Policy	Select to inherit reorder point values. This point determines the policy item inventory level at which you launch a replenishment order.
Static Method	Select to use the static calculation method that is defined for the control group. The system uses static calculations to arrive at fixed values for systems that recognize only a single, fixed value for each parameter in the policy. Define the method on the Policy Controls page. Static methods include creating a policy that equals the time-phased policy for a specific period number or creating a policy by averaging a number of periods, where the system sets the static policy equal to the weighted average time-phased policy over the next number of periods that you define.
Minimum/Maximum Policy	Select to inherit minimum and maximum inventory level values. These values are only warnings that concern stock levels. They do not control the level.
Usage Method	Select to inherit stocking policy calculations that the system bases on historical usage. The system uses this method if you set either the safety stock or the minimum method to use the maximum lead time method. The system bases inherited values on a review of the historical demand over the number of effective historical periods; the safety stock or minimum is set to a constant value (the same for all periods).
Cost Details	Select to update the cost information (including ordering cost and carrying cost percentage) that you enter on the Other Data page when defining the control group.
Policy Control	Select the control groups from which you want items in this policy set to inherit controls. You can link an item to only one control group. If you have multiple control groups associated with a policy set you can inherit controls from the groups to items at once.