Generating Purchase Orders
Access the Work With Stocked Item Reorder Point form.
- Suggested Order Quantity
Displays a value that is calculated by the P.O. Generator program, Buyer's Inquiry program, and Buying Guide report with these variables:
AVAL: Available inventory, as calculated from on-hand quantity less committed quantity plus quantity on PO, including quantity in receipt routing.
ROP: Reorder point, taken from the ROP in the branch inventory record of the primary storage location (assuming that the ROP is not missing); or the ROP as calculated (see the definition of ROPC for more information). The system calculates reorder point as in the following way:
ROP = (Annual Sales × Lead Time Days) ÷ Number of Days in Year) + Safety Stock)
If Safety Stock is not stated on the Quantities form, then the system uses this formula:
ROP = ((Annual Sales × Lead Time Days) ÷ Number of Days in Year) + square root of (Annual Sales × Lead Time Days) ÷ Number of Days in Year)
EOQ: Economic order quantity (or reorder quantity ROQ), taken from the ROQ in the branch inventory record of the primary storage location (assuming that the ROQ is not missing); or the calculated EOQ (see the definition of EOQ for more information). The system calculates Economic Order Quantity in the following way:
EOQ = Square root of ((2 × Purchase Order Issue Cost × Annual Sales) ÷ (Inventory Carrying Cost × Average Cost)
The calculation is:
1 If AVAL > ROP, then SOQ = Zero
2 If AVAL = ROP, then SOQ = EOQ
3 If AVAL < ROP, then SOQ = EOQ + (ROP – AVAL)