Order policy
The ordering policy is a part of the procurement . It regulates when the material requirements in a company's materials management are covered by an order (order time) and how much is ordered. Through the combination of fixed or variable order quantities and order periods, the right demand is to be determined and an optimum in the order policy to be achieved.
To find the optimal order policy, the company may need to a. Weigh up costs fixed to the order (costs incurred in the same way with every order), distribution costs and storage costs in order to minimize the total costs.
A company doesn't just have an order policy. Usually several variants are combined for different material groups. There is a mix of politics. The higher the consumption of individual material groups, the more suitable an ordering policy with a variable ordering period is. Materials can be categorized using ABC analysis and XYZ analysis to select the most appropriate policy.
The cost is a crucial part of the policy choice. However, there are also cost-independent decision factors such as B. long-term planning or current supply contracts.
Policies in detail
Six basic policies of the order are derived from the four forms of order quantity, order period, fixed and variable .
| Order quantity / order period | fix order rhythm system | variable order point system | fixed / variable (mixed system) |
|---|---|---|---|
| fix | t, q policy | s, q policy | T, s, q policy |
| variable | t, S policy | s, s policy | T, s, S policy |
Legend:
- t = order frequency
- s = reorder level / order limit
- S = target stock
- q = order quantity
- T = control cycle
Order rhythm systems
t, q – politics
The order quantity and period are set in advance. This policy is also known as the order rhythm lot size policy , since fixed quantities are ordered on fixed dates. The t, q policy requires only a small amount of planning effort and no ongoing control of the inventory. However, if there are fluctuations in demand, it can lead to shortages or high storage costs ( overstock ).
t, S – politics
The order quantity is variable, the order period is fixed. It is referred to as the order rhythm-warehouse level policy , since the required quantity is ordered on fixed order dates until the target stock is reached. The t, S policy counteracts the risk of excess stocks. Here the stock is limited to the target stock. Since there is no reorder point that triggers an order, there can be shortages.
Order point systems
s, q – politics
The order quantity is fixed, the order period is variable. The order point lot size policy is so called because when the reorder point is reached, a fixed order quantity is ordered. The s, q policy takes into account fluctuations in demand, so there are no shortages and the costs of tying up capital remain low. However, it requires a very high level of planning effort and ongoing controls of the warehouse.
s, S – politics
The order quantity and period are variable. This policy is also called the order point inventory level policy . When the reorder level is reached, an order is triggered. The order quantity is based on the target stock, up to which it is always replenished. The s, S policy is a very complex order policy. Ongoing controls of the inventory are necessary. However, the capital commitment is low and shortfalls are avoided.
Mixing process
T, s, S – politics
A comparison of the stock with the reorder level takes place here at fixed time intervals (control cycle) . If the stock level reaches or falls below the reorder level, the target stock is replenished. The T, S, S policy requires constant monitoring of the warehouse. There are no shortages and the amount of stock is limited by the target stock ...
T, s, q – politics
There are two different variants for this in the literature:
Version 1:
Fixed order quantities are ordered at fixed order times or when the reorder level is reached or not reached. The T, s, q policy also avoids shortfalls. However, the fixed order quantities can lead to overcrowding in the warehouse (there is no upper limit), which can lead to high capital commitment costs. It is used when consumption fluctuates significantly.
Variant 2:
In the literature, however, an order policy in which orders are only placed at fixed order times when the reorder level has been reached or fallen below is sometimes also referred to as T, s, q policy. There is an inventory control at fixed times, but this does not necessarily trigger an order.
swell
- ↑ based on: O. Grün: Industrielle Materialwirtschaft. In: M. Schweitzer (Hrsg.): Industriebetriebslehre. Munich 1994, p. 487, tab. 6-9.
- ↑ Heiko Burchert, among others: Logistics: tasks and solutions. 1st edition. Oldenbourg-Verlag, 2000, ISBN 3-486-25483-9 , p. 45 f.
literature
- Oskar Grün: Industrial materials management. In: M. Schweitzer (Hrsg.): Industriebetriebslehre . Munich 1994, ISBN 3-8006-1755-2 .
- Wolfgang Vry: Procurement and storage. 7th edition. 2004, ISBN 3-470-63127-1 .