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    Order Placement With MINMAX Buy Model

    Uploaded by

    Saad Javed
    Orient uses a MINMAX model to automatically place orders based on historical production data and last year's same month production. The minimum value is used to trigger a reorder to maintain optimal inventory levels for smooth production, while the maximum value signifies the new desired stock level followed by a reorder. The system generates a purchase order when inventory reaches the minimum point. To account for demand variations, forecasted demand is divided into quartiles using an N+3 rule, where N is the present month and 3 is the next three months. A safety stock is also maintained to avoid stock outs due to uncertain supply and demand fluctuations.

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    Order Placement With MINMAX Buy Model

    Uploaded by

    Saad Javed
    23 views2 pages
    Orient uses a MINMAX model to automatically place orders based on historical production data and last year's same month production. The minimum value is used to trigger a reorder to maintain optimal inventory levels for smooth production, while the maximum value signifies the new desired stock level followed by a reorder. The system generates a purchase order when inventory reaches the minimum point. To account for demand variations, forecasted demand is divided into quartiles using an N+3 rule, where N is the present month and 3 is the next three months. A safety stock is also maintained to avoid stock outs due to uncertain supply and demand fluctuations.

    Original Description:

    inventory management

    Original Title

    Miniimax

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    Orient uses a MINMAX model to automatically place orders based on historical production data and last year's same month production. The minimum value is used to trigger a reorder to maintain optimal inventory levels for smooth production, while the maximum value signifies the new desired stock level followed by a reorder. The system generates a purchase order when inventory reaches the minimum point. To account for demand variations, forecasted demand is divided into quartiles using an N+3 rule, where N is the present month and 3 is the next three months. A safety stock is also maintained to avoid stock outs due to uncertain supply and demand fluctuations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    Order Placement With MINMAX Buy Model

    Uploaded by

    Saad Javed
    Orient uses a MINMAX model to automatically place orders based on historical production data and last year's same month production. The minimum value is used to trigger a reorder to maintain optimal inventory levels for smooth production, while the maximum value signifies the new desired stock level followed by a reorder. The system generates a purchase order when inventory reaches the minimum point. To account for demand variations, forecasted demand is divided into quartiles using an N+3 rule, where N is the present month and 3 is the next three months. A safety stock is also maintained to avoid stock outs due to uncertain supply and demand fluctuations.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Order Placement with MINMAX Buy model:

    Orient is using MINMAX model to place orders. It involves the ERP SAP automatically
    evaluates the historical data to which weight has been assigned according to preceding month
    production and relates it with last years same month production to evaluate minimum and
    maximum value to place the order. Minimum value is used to save production which means the
    optimal inventory level for smooth production while the maximum value is to save cost of the
    inventory. The technique allows for keeping track of total current stock level that is the sum of
    stock on hand and the stock on order for every single SKU. The Min value signifies the stock
    level that triggers the reorder while the Max value signifies the new desired stock level that is
    followed by the reorder; hence the reordered quantity is represented by the difference between
    the Max and the Min stock level values. The moment when the inventory reaches the minimum
    point, the system generates a purchase order.

    To avoid any crude form of fixed Economic Order Quantity, the management distributes the
    forecasted demand for each SKU into quartiles through a N+3 rule. The N+3 rule is a
    technique where N represents the present month and 3 represents the next three months. The
    purpose of using N+3 rule is to counter the variations in demand that are assumed to be constant
    for Fixed Order Quantity model. It results in similar Min and Max values at all times and
    constant reordering taking place for every SKU. To avoid any stock outs, the company maintains
    a Safety stock (buffer stock) that is additional quantity of items to mitigate the risk. Due to
    uncertain variations in supply and demand, adequate level of safety stock for each SKU is
    essential for the smooth running of the business operations.

    Since, Orient is not following a pull manufacturing system which involves orders being placed
    with the suppliers only when required, MINMAX model is a workable methodology for its pre-
    determined forecasted scheduling for placing orders with suppliers. In case of LED, the company
    maintains a total of 60 SKUs. The estimated demand of LED sales is 190,000 in 2016 that is
    divided into four quartiles with a maximum point of 47,500 and minimum point (reorder point)
    of 10,000. However, the management maintains a safety stock of 12,000 units to avoid stock-
    outs.

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