Documentation

SkuBrain 101

Supplier lead times

Next, to make things a bit more realistic, let’s say that we can’t get stock instantaneously for this product. Rather, it will take 1 month from when we place an order until products are available to customers (so lead time = 1 month).

Also assume we have stock_on_hand = 5 and the same forecast as before:

# Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Total
Forecasted sales (units) 4 5 7 3 4 6 29

In this case, by the time our new stock arrives we will only have one unit left in stock.

left_over = Max(0, stock_on_hand - lead_time_demand)
          = 5 units - 4 units
          = 1 units

And the amount of stock that we should reorder thus becomes:

Requirement = forecasted_demand_from_delivery - left_over 
            = 29 units - 4 units - 1 units
            = 24 units  

So far so good. Now let’s take a look at order frequency.