Advanced Inventory Management FAQ
The suggestions in this topic apply specifically to users with known and fixed demand for inventory replenishment using an inventory Order-Up-To policy.
When will the current inventory level reach zero?
Inventory will reach zero based on the demand of the product. NetSuite calculates the demand of the product from sales orders and opportunities. NetSuite uses Order Analysis Interval or Seasonal Analysis Interval based on the selection on the Inventory Management Preference page. Your setting for the Estimated Demand Change can be used to adjust the demand from the calculated expected demand.
When should I order the item? At what inventory level should I start to place an order for a vendor? What is the reorder point?
You know the lead time from vendor and the demand (slope). Therefore, the reorder point is based on (demand / time * lead time). If you set the Autocalculate box, the lead time can be autocalculated based on the past three purchases. Lead time can also be overridden.
How much should I order?
The amount of inventory to be ordered can be based on the difference between the preferred stock level and the reorder point. The preferred stock level can be set manually. You can also let NetSuite autocalculate the preferred stock level based on the number of days of inventory you want to keep. For example, you may want to always keep 5 days worth of inventory on hand.
The autocalculation is based on this formula: (demand/days) * (amount in the Days field next to the Preferred Stock Level field).
This diagram shows the expected inventory level with the safety stock and preferred stock level incorporated.
EXAMPLES
Example 1
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Item SK700-HP-A
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Lead time is 12 Days
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Reorder point is 1 because demand is low (one order in the past 3 months)
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Preferred Stock Level is set manually at 2.
Example 2
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When demand is zero and the preferred stock level is autocalculated, the preferred stock level is zero.
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There is not enough historical demand to determine the demand per day. The slope is zero.
Example 3
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If the preferred stock level (in days) is less than the lead time, the preferred stock level = reorder point.
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In this case, the preferred stock level (in days) must be greater than the lead time for vendor.
