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)