Advanced Inventory Management FAQ
The suggestions in this topic are for users with known and fixed demand who use an Order-Up-To policy for inventory replenishment.
When will the current inventory level reach zero?
Inventory will reach zero based on product demand. NetSuite calculates product demand from sales orders and opportunities. NetSuite uses either the Order Analysis Interval or Seasonal Analysis Interval, depending on the selection in the Inventory Management Preference page. You can use your Estimated Demand Change setting to adjust the calculated expected demand.
When should I order an item? At what inventory level should I start to place an order for a vendor? What's the reorder point?
If you know your vendor's lead time and your demand (slope), the reorder point is based on (demand ÷ time × lead time). If you checked the Autocalculate box, lead time is calculated based on your last three purchases, but you can override it if needed.
How much should I order?
The amount you order is usually the difference between your preferred stock level and your reorder point. You can set your preferred stock level manually, or let NetSuite calculate it based on how many days of inventory you want to keep. For example, you might want to keep 5 days worth of inventory on hand.
NetSuite uses this formula for auto-calculation:
(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 included.
EXAMPLES
Example 1
-
Item SK700-HP-A
-
Lead time is 12 Days
-
Reorder point is 1 because demand is low (one order in the past 3 months)
-
Preferred Stock Level is set manually at 2.
Example 2
-
When demand is zero and the preferred stock level is auto-calculated, the preferred stock level is zero.
-
There isn't enough historical demand to determine the demand per day, so the slope is zero.
Example 3
-
If the preferred stock level (in days) is less than the lead time, the preferred stock level = reorder point.
-
In this case, the preferred stock level (in days) must be greater than the lead time for vendor.
