Example of Inventory Rebalancing

This topic provides an example of inventory rebalancing in a replenishment plan.

On the Inventory Rebalancing tab on the Plan Options page for the replenishment plan, the Move excess to sweep location check box is selected, but the Reduce partial recommendations check box isn't selected.

This table provides information about the clusters in the replenishment plan:

Sequence Number on Inventory Rebalancing Tab	Cluster Name	Locations	Sweep Location
1	Cluster 1	M1, M2, M3, M4, and M5	M1
2	Cluster 2	S1, S2, S3, S4, and S5	S4
3	Cluster 3	M1 and S4

Within each cluster, the locations don't have any priority.

This table lists some of the lead times between source and destination locations in Cluster 1:

Source Location	Destination Location	Lead Time
M1	M3	3
M2	M3	2

This table lists some of the lead times between source and destination locations in Cluster 2:

Source Location	Destination Location	Lead Time
S1	S3	3
S2	S3	2

Inventory Rebalancing in Cluster 1

After the Projected Inventory measure is calculated for an item in the locations of Cluster 1, the excess inventory and inventory shortage are initially computed as follows:

Measure	M1	M2	M3	M4	M5
Excess Before Rebalancing	12	6
Shortage Before Rebalancing			9	1	7

Note these points:

1. The inventory rebalancing process starts with the location that has the largest inventory shortage: M3.

2. M1 and M2 have excess inventory, but the lead time between M2 and M3 is less than the lead time between M1 and M3. Therefore, a planned order for transferring 6 units is created between M2 and M3.

   The inventory shortage at M3 is now 3 units (9 - 6), and the excess inventory at M2 is zero (6 - 6).

3. A second planned order for transferring 3 units is created between M1 and M3.

   The inventory shortage at M3 is now zero (3 - 3), and the excess inventory at M1 is 9 units (12 - 3).

   Note: If the Reduce partial recommendations check box were selected on the Inventory Rebalancing tab, a planned order for transferring 9 units would have been created between M1 and M3. Consequently, only one shipment would have been created for M3.

4. The inventory rebalancing process picks up the location with the second largest inventory shortage: M5.

5. A planned order for transferring 7 units is created between M1 and M5.

   The inventory shortage at M5 is now zero (7 - 7), and the excess inventory at M1 is 2 units (9 - 7).

6. The inventory rebalancing process picks up the last remaining location with an inventory shortage: M4.

   A planned order for transferring 1 unit is created between M1 and M4.

   The inventory shortage at M4 is now zero (1 - 1), and the excess inventory at M1 is 1 unit (2 - 1).

This table provides the final computation of the excess inventory and inventory shortage for the item in Cluster 1:

Measure	M1	M2	M3	M4	M5
Excess After Rebalancing	1	0
Shortage After Rebalancing			0	0	0

Inventory Rebalancing in Cluster 2

After the Projected Inventory measure is calculated for the item in the locations of Cluster 2, the excess inventory and inventory shortage are initially computed as follows:

Measure	S1	S2	S3	S4	S5
Excess Before Rebalancing	8	6
Shortage Before Rebalancing			9	1	7

Note these points:

1. The inventory rebalancing process starts with the location that has the largest inventory shortage: S3.

2. S1 and S2 have excess inventory, but the lead time between S2 and S3 is less than the lead time between S1 and S3. Therefore, a planned order for transferring 6 units is created between S2 and S3.

   The inventory shortage at S3 is now 3 units (9 - 6), and the excess inventory at S2 is zero (6 - 6).

3. A second planned order for transferring 3 units is created between S1 and S3.

   The inventory shortage at S3 is now zero (3 - 3), and the excess inventory at S1 is 5 units (8 - 3).

4. The inventory rebalancing process picks up the location with the second largest inventory shortage: S5.

5. A planned order for transferring 5 units is created between S1 and S5.

   The inventory shortage at S5 is now 2 units (7 - 5), and the excess inventory at S1 is zero (5 - 5).

This table provides the final computation of the excess inventory and inventory shortage for the item in Cluster 2:

Measure	S1	S2	S3	S4	S5
Excess After Rebalancing	0	0
Shortage After Rebalancing			0	1	2

Inventory Rebalancing in Cluster 3

These are the initial values for the excess inventory and inventory shortage for the item in Cluster 3:

Measure	M1	S4
Excess Before Rebalancing	1
Shortage Before Rebalancing		1

A planned order for transferring 1 unit is created between M1 and S4.

The inventory shortage at S4 is now zero (1 - 1), and the excess inventory at M1 is zero (1 - 1).

This table provides the final computation of the excess inventory and inventory shortage for the item in Cluster 3:

Measure	M1	S4
Excess After Rebalancing	0
Shortage After Rebalancing		0