Improve Re-Order Low Stock with "Optimal Stock" Algorithm
started a topic
almost 5 years ago
We used to use the "To Min Level" option to create new Purchase Orders. While this was good to a point, our business is pretty seasonal so throughout the year, we would have to keep adjusting the minimum levels to ensure we didn't dip too low, or hold too much.
Therefore we decided to try the "Optimal Stock" option. This actually works pretty well for products that are selling regularly. However, I found out that it is powered by the sold stats of the item. Where this falls down is that sold stats are only kept for 4 months. Therefore any item that doesn't sell for 4 months, will not ever come up to re-order using this method. This means to create new purchase orders, I have to first create one using the "Optimal Stock" option, and then add to it using the "To Min Level" option to ensure none of the slower sellers get missed. This is pretty inefficient and quite simply unnecessary.
My suggestion is a simple improvement to the algorithm to combine what's currently there with the "to min level" option. This means, if there are sold stats available for an item it can work exactly as it does now. If there are no sold stats available, then to just check the min levels. If it's below the min level, add it to the purchase order.
This will create a complete "Optimal Stock" algorithm that should make the re-order process very accurate and efficient.
For what it's worth, and this is just an obsevation rather than a suggestion, the "Optimal + Safety Stock" is a bit crazy. Instead of suggesting I order about £100 worth of product from a supplier, it suggested I order about £39,000 worth of stock. In some cases that is about 10 years worth of stock! How much safety stock does it need!! Could be worth a rethink on that algorithm too.
1 person likes this idea
almost 5 years ago
Update: After a continued chat with Linnworks support, it seems my facts above are not 100% correct, although the feature request is still relevant. So the sold stats don't power the Optimum Stock feature, it's the sold history. However, it's based on an average sales. Here's how it works:
Optimal Stock = AVG(Weekly sales) x AVG(Lead_Time_In_Weeks) you sell 20 items per week * 1 week lead time = 20 optimal stock
If your stock level is 0, re-order stock will become 20. If you have 50 open orders - it will still order 20, because it only counts Average Stock level that you are selling in a week.
Another example (this happened to me). You have a generally slow selling item so the "Optimal Stock" is low, say 2. You have 20 in stock. You sell all 20 in one order, but when you go to pick it, you realise 9 are damaged so you adjust your stock level down to 11 accordingly. Now you have -9 available, an order for 20 but a CURRENT stock level of 11. Because that current stock level is higher than the "Optimal" stock level of 2, this item will NOT be put on a purchase order using the Optimal Stock option.
Therefore my suggestion still stands, the Optimal Stock algorithm should be improved or added to so that there is effectively an "Optimal Stock + Fulfill Orders" option, or "Optimal Stock + Min Level" option so that if something does suddenly sell well, or there is a physical stock issue, the system can cope properly with it.