Item Description is any combination of text or numbers (up to 50) to aid you in identifying this item to you. It is usually the item part number, sometimes the item description; it is your choice. Whatever is entered here is echoed back to you in the resulting email in the subject line of that email.
Item Cost is the unit cost of the item in dollars. Do not include the dollar sign ($).
Holding Cost is the cost of holding an item in inventory for one full year. This cost is expressed as a percentage of the item cost. Generaly, the holding cost is the same for all items in a given inventory, and does not vary on an item-by-item basis. Holding cost may be broken down into several component costs, as itemized below:
| Holding Cost Worksheet | |
| Warehousing Costs |
5
|
| Cost of Money (or desired ROI) |
20
|
| Insurance |
1
|
| Property Taxes |
1
|
| Shrinkage |
5
|
| Spoilage |
0
|
| Obsolescence |
10
|
| Inflation (or deflation) |
-4
|
| Other |
0
|
| Total Holding Costs (%) |
38.0
|
The costs shown in the above table are presented as a sample only; your costs may vary dramatically from the above example.
Ordering Cost is expressed as dollars-per-order, and is independent of the quantity ordered. It is those overhead costs that are associated with placing a re-stocking order with your vendor. With some exceptions, most of these costs are labor. It is normal for a company to use the same ordering cost figure for an entire inventory, or possibly divide an inventory into several catagories. Following are typical ordering costs:
|
Ordering Cost Worksheet
|
|
| Purchasing Agent Labor Cost |
10.00
|
| Office Supplies (P.O.s, checks) |
2.00
|
| Bidding costs |
0
|
| Order Approval Costs |
5.00
|
| Freight (if not item dependent) |
0
|
| Receiving and Inspecting Costs |
5.00
|
| Order Follow-up costs |
0
|
| Information System Costs |
10.00
|
| Other |
20.00
|
| Total Ordering Costs |
52.00
|
The costs shown in the above table are presented as a sample only; you may have additional cost catagories and your costs may vary dramatically from the above example.
Annual Usage is the quantity of items that you anticipate using annually. Typically this quantity is based on the historical usage data of the item and then applying an adjustment for the forthcoming year. Be sure to use the same unit of measure here as is all other fields, i.e., don't purchase by the dozen, then sell by the unit; you must buy and sell by the same unit of measure.
Lead Time is the number of days that elapse between when an item reaches the ReOrder point and when the item has been re-stocked. It is the sum of all delays that can occur between these two points in time. The vendor's lead time is usually the longest, but some companies have internal delays that can also be significant.
| Lead Time Worksheet | |
| Information System delay | .5 |
| Management Approval delay | .5 |
| Purchasing delay | .5 |
| Mail delivery delay | 0 |
| Vendor's Lead Time | 7 |
| Shipping time | 2 |
| Receiving & Inspection delay | .5 |
| Information System delay | .5 |
| Other delays | 0 |
| Total Lead Time | 11 |
This Lead Time Worksheet is a sample only; your lead time can vary dramatically from the above example. Also, each item in your inventory can have a different lead time, although many items can be grouped with similar lead times.
Optimize for Lowest Cost option will tell StockRight to consider the following costs during the optimization proccess:
This method will yield the most profitable inventory management policy. As a byproduct you also get:
Optimizing for Lowest Cost is the preferred choice.
Stock Outage Event Cost is the cost penalty that is incurred when an item is needed, but none is available. The cost for such an event can vary widely. Herein are presented 4 possible methods for determining this cost:
There are many methods of estimating the cost of a stock outage event, and the above are meant to provide examples for you to build on.
Optimize for Minimum Service Level option will tell StockRight to strive for the service level entered here. In this proccess, StockRight determines the Optimal Order Quantity by looking at these costs:
The Optimal ReOrder Point is then determined by finding the minimum quantity that will satisify the user's requirements for a minimum service level. The Minimum Service Level field is expressed as a percentage, ie, 95%, 99%. Do not enter the % sign. This proccess does not use the stock outage cost field, and it may be left at zero.
Analyze the Current Stocking Policy is an option that will take your current Order Quantity and ReOrder Point and analyze along side StockRight's optimal values for these. This can generate some eye-opening comparisons, and is a worthwhile exercise.
Current Order Quantity is the quantity of items that are ordered when it is time to replenish this item. This number must be 1 or greater and must be an integer (no decimals).
Current ReOrder Point is the quantity of items that remain in stock when a purchase request is triggered. This quantity should also take into account any items that are committed, but not yet delivered. The number entered here must be an integer (no decimals). Zero (0) is a legitimate entry; negative one (-1) is also a legitimate entry, as that would indicate a non-stocking item.
Submit to StockRight button will send your data to StockRight where it will be optimized and analyzed. The results will then be placed into an e-mail message and returned to you. All of this will happen within a few seconds.
TEXT-ONLY e-mail option is for those users that have an e-mail program that does not decode HTML. The StockRight results are normally formated with the HTML code for a much nicer presentation, but for those users that use a TEXT-ONLY program, these HTML codes look like a lot of garbage mixed in with the data. For the TEXT-ONLY users, an unformated version of the results will be sent if you check this box. Note: Microsoft Outlook users do not need this option.