Module: Balancing¶

Executive summary¶

This is a functionality that adjusts the number of orders on individual days so that each day the sum of orders is between the specified minimum and maximum. This optimization is necessary for optimal capacity utilization. In the case of more orders for a given day than the maximum allowed, part of the orders is moved to other days. Similarly, situations where there are less than the minimum order for a given day move orders from other days to that day. The goal is to maintain the optimal number of orders each day and thus cover sudden fluctuations.

Functional description¶

Order suggestions without balancing module¶

Without the balancing module, STOCK proposes orders regardless of capacity. Because of this, there may be significant fluctuations during the days. For example, STOCK proposes orders for about 6,000 lines, but due to limited inventory in stock, in our example, 4,500 lines are exported on the first day, 2,000 lines on the second day, 3,000 on the third day, 3,500 on the fourth day, and 1,500 on the fifth day.

Our example shows inconsistencies in the workload of employees and logistics throughout the week. On the first day when the exported quantity reaches its peak, the employees do not catch up, and on the contrary, on the last day, the employees have nothing to do.

Figure No. 1: Non-optimal release from central warehouses within 5 days.

Module functions¶

The input must be entered first - the minimum and maximum for each day. This value is variable depending on the customer’s warehouse capacity. These values are set for a group - usually a delivery truck, etc.

The STOCK system monitors whether the proposed lines for export to branches in the given groups, which are covered by today’s stock in the central warehouse, reach the minimum limit or exceed the maximum. In a situation where the number of lines does not fall within the optimal quantity, stock optimizes the proposed number of lines for export by taking the necessary number of lines to match the lower limit from the following days and deleting the quantity exceeding the upper limit (STOCK resubmits these lines the next day).

The removal of extremes is limited by the settings of mandatory items. It is possible to move the given lines only if the item is not mandatory (eg promo, customer order, stockout avoidance orders), then the proposed lines for export are sorted according to importance, which lines are to be exported first, and which lines can be exported for other days .

Rules for moving orders¶

1. Rule

In the STOCK system, the option to prioritize according to the stock level compared to minimal stock will be set. In a situation where line priority is defined using the inventory level status compared to minimal stock, items with stock at a branch less than minimal stock will take precedence over items where the stock at the branch is higher than the minimal stock.

2. Rule

In the next step, or if we do not want to define priorities using minimal stock, we will sort the lines using ABC analysis. Items A with stock at a branch less than minimal stock have higher priority than items D with stock under minimal stock.

3. Rule

For example, we have two possible lines to complement today’s proposal – their stocks are under the minimal stock and both items fall into group A. We will give preference to an item that has a previously predicted outage at the branch. We want to export this line rather than the line where the item at the branch has a predicted outage later.

4. Rule

In the case when two lines have the same priority according to the above rules – e.g. the stock level is below the minimal stock, they are both in group A and have the same predicted stockout date, we will sort them further according to the delivery calendar. In a situation where STOCK wants to cut the lines above the optimal amount and the rows are already sorted according to the mentioned rules, STOCK deletes the line at the branch that has the possibility of delivery at the earliest date (The sample branch delivers 1x a week and 2x a week). If the branch has to replenish the branch in 14 days, its lines take precedence over the branch, which they can introduce next week.

Figure 2: Sorting items available for adding lines and trimming lines to achieve optimum by priority. The items with the highest priority are located in the diagram at the top.

Large number of orders¶

The order proposal for the day is 4500, the minimum is 3000 and the maximum is 3500. Thus, it is necessary to “solve” 1000 items that are above the maximum. Mandatory items must not be postponed.

Items are sorted by priority:

1. If the number of mandatory items fit within the proposed maximum, all items above the maximum will be moved to the following days.
2. If the number of mandatory items did not fit into the proposed maximum, all mandatory items are exported even at the cost of overloading capacities.

Small number of orders¶

The proposal of orders for the day is 2000, the minimum is 3000 and the maximum is 3500. It is therefore necessary to „add“ 1000 items that are below the minimum.

Since the STOCK system forecasts sales (for forecastable items) up to 1 year in advance, it could theoretically move the lines from the proposed exports, for example, half a year ahead. To avoid increasing the probabilities of deviation of the forecast from reality, a parameter should be determined setting the maximum number of days in the future, what lines of proposals I can move to today. For example, STOCK can look max 30 days into the future.

Sort a line from the future that I’m forwarding

1. Mandatory items
2. According to the financial load of the warehouse
   1. STOCK prefers cheap items that do not have a high impact on the inventory budget

Optimal order quantity¶

The proposed quantity is optimal if the number of items is in the range of the set minimum and maximum. In these cases, the Balancing module does not interfere with the number of orders.

Settings¶

1. Setup of groups for balancing
2. Optimal line limit for groups
   1. For days of the week
      1. Minimum
      2. Maximum
   2. Date-specific exception
      1. A specific date is entered, with a minimum and maximum exception for it
      2. For example, if quantity would be cut for a long time, a stronger shift is planned and a larger number of lines are allowed
3. Settings for moving from the future
   1. “Maximum number of days of planned delivery that I can forward according to the date of ordering
   2. Maximum inventory value I can move
      1. Used to monitor overstocks caused by optimization

Reporting¶

There are three reports to record the steps that have taken place within the optimization. One report includes all lines that have been deleted because the number of lines had to be reduced to reach optimum. The second report is used to list lines that have been added from the future. The third report presents statistics for a specific day and central warehouse.