Inventory shortage report is used to help calculate the inventory required to keep stock for production and sales to be efficient.
On the search page, based upon the lead time for your product and the cycle of product sales and usage you can make it 6 months or 12 months.
Limit by a specific vendor is also available.
Limit by a specific store is also available.
What the system does is as follows, list all the parts that it calculates a shortage for.
1 checks the current balance in Beginning balance if you start off with no inventory and have a requirements or a sale it will suggest to order more. 2 Required is checking for any work order from manufacturing where this product is used.
3 Receiving is what you have on purchase order processing and is on it way into your inventory.
4. Committed is what sales orders you have that require this product directly.
5. Min Quantity is the least amount of inventory you want to keep in stock before you reorder the product. From the requirements record. (A minimum stock level is the level of an item of material, below which the actual stock should not normally be allowed to fall. In other words, it refers to the minimum quantity of a particular item of material that must be kept in the stores at all times.)
6. Safety Stock is the least amount of inventory you want to have in stock at all times. From the requirements records. (Safety stock is an additional quantity of an item held by a company in inventory in order to reduce the risk that the item will be out of stock.)
7 Quantity Short - calculated qty shortage based upon Minimum order qty and Safety Stock levels and Average usage and lead times. Quantity Short = BBalance - Required + Purchase order qty - Committed sales order - Safety Stock level.
8 Reorder Quantity - is calculated based upon the shortage qty and any safety stock and minimum order quantity.
9 Average Sales Usage - is based upon the number of months you selected and the quantity sold and used in manufacturing for that product.
10. Vendor Number - if a primary vendor is assigned for this product it will show up here.
11. Lead time in days, it takes an average number of days from when you order the product to when it arrives in your store.
Every company has different logic for reordering product. Some have short lead times so they do not need to take that in calculating reorder point. But some have long lead times and have to use that in account for the calculation.
Every manufacturing business out there faces questions like:
How many units of materials should I order from my supplier?
— When should I place my next supply order? and;
— When should I place a new manufacturing order?
The answer to the first question is: it depends on the demand for your products. You project this based on historical demand, and other factors like seasonal changes.
The other two questions are answered by calculating your reorder point, or ROP.
When you first started out in your manufacturing journey, you might have used your instincts and common sense to estimate how much of each material to order.
After all, you know your workshop better than anyone. Your supply orders came in and you manufactured your product range problem-free.
But intuition can only take you so far. As your business grows, and your orders get more complex and numerous, it may start to get more difficult to accurately work out your raw material requirements.
Your workshop only has so much space, and excess amounts of material A and B are piling up, while you keep running out of material Z. Not to mention the increased complexity of adding more products, generating more SKUs.
As soon as you apply a reorder point formula, you can take your order efficiency to a whole new level. What is a Reorder Point?
In short, a reorder point is a stock threshold that you don’t want to go below. Therefore the ideal inventory reorder point allows for adequate time to make a new order before your stock reaches this threshold.
Reorder point is the metric that tells you two essential things:
When it is the right time to order more materials from your supplier(s); and
When it is the right time to manufacture more products by creating a manufacturing order (MO).
When the stock level for a material or finished product is about to reach the reorder point, a new order should be placed immediately.
This takes away any doubts or second-guessing. Your reorder point is there, clear as day, and you just need to react when it is reached.
Your stock will be regulated much better, with fewer interruptions like supply-chain breakdowns or bottlenecks.
Your inventory reorder point levels should cover every item in your inventory, including every product variation’s product recipe. Sound complicated? This is part of a bill of materials (BOM).
You can link your inventory levels with each product’s BOM and track it with the right MRP system.
In fact, you will have more time on your hands to develop your business and focus on your craft.
More accurate materials requirements planning and more peace of mind. There’s no downside to setting reliable reorder point levels and sticking to them.