Module: Managing new products and sell-outs

Executive summary

Every portfolio of every company includes new items. Given a lack of history of sales of these items, it is rather difficult to manage them automatically. The STOCK system features tools with which you can manage the new items in three basic ways:

1. Following the Predecessor – Successor strategy: a new item takes over another product’s history.
2. To import base stock from the ERP system.
3. Predict the whole category of the new product. Subsequently, the new product takes over a certain percentage of forecasted sales. Notice that this is not included in the present module, but in Middle-out forecast module: Calculating monthly sales forecasts.

A product starts its life cycle as a new product – and it ends it by being a sell-out product. STOCK manages the sell-out of a product by selling out the current stock on hand; after that, the product is not ordered any more.

Functional description

Setting a link Predecessor – successor using the SIDI

To assign to a product a predecessor is the easiest way to manage new products. The new product takes over the complete sales history of its predecessor and makes it “its own”. That way, it is rather easy to start a product management.

The STOCK system allows you to adjust the period for which a product should be considered a new product – and thus how long are the predecessor’s sales data taken as the product’s history. After some time – when the adopted history is long enough – this function is shut down, hence, the predecessor’s history is not taken by the new product anymore.

The predecessor can be modified by a ‘percentage value’: for instance, a new product can only take over a 5% of the predecessor’s history. This, of course, is extremely useful if products have different packaging, or, for example, a new product is a combination of several predecessors.

Chaining predecessors and successors

Suppose an item P3 has a predecessor P2 and suppose further that P2 has another predecessor P1: it means that the item P3 takes over the history of the P1 item as well, although this relationship is not directly defined (for simplicity, we assume that all items in this example are in a single warehouse).

Given the possible complex relations between various predecessors and successors, also rather complex ties can develop:

In this case, the item P3 inherits sales history of both items P2 and P1.

The item P6, on the other hand, inherits sales history from all the items P4 to P1.

Loop control

Predecessors and successors might loop (this can happen).

For example, the item P4 has a predecessor P3, the item P3 inherits from P2; P2 from P1 – and P1 from P3.

In this case, all looped links are ignored and only a non-looped inheritance applies (here P4 from P3).

Virtual items

You can find more details on virtual items in the Module: Virtual warehouses. For the purposes of this chapter, we should note that when setting predecessor for items sold at virtual sale channels, the link Predecessor - Successor must be set for each of the virtual channel separately.

Showing the link Predecessor – successor

If a product has a predecessor, it is visible in the green information bar:

The same information can be read off the detail description of the product (see the Module Detail).

Marking a product as sell-out using the SIDI

If a product is labeled as sell-out, it shows the following properties:

• In the module Sales forecast, the sale of the product is forecasted in a standard way, the sale, however, will be relatively reduced given the increasingly lower levels of stock on hand.
• In the Module Supply Management, further stocking of the product is disabled.

Extensions

Using the stock on hand and orders received from the customer

In case the customer perceives the predecessor and successor products as identical (i.e., fully interchangeable) and if they have the same unit of measurement, a shared stock on hand (as well as shared orders from customers) can be set for these items.

In reality, this boils down to:

• The successor considers the stock on hand ‘as its own’ and so long the stock on hand lasts, the product is not ordered.
• The successor considers the orders received from customers ‘as its own’ and it fulfills these orders from its own (or shared) stock. The idea is that the successor will have to supply the future orders from its stock.