Range (logistics)

In logistics and inventory management, the range is the ratio of average inventory and average consumption per unit of time.

General

The range, like the stock turnover, is an important economic key figure for evaluating the profitability of inventory management . This range is the reciprocal of the inventory turnover rate and states how long an inventory without new items will be sufficient to meet demand . In supply chain management , this key figure is used for monitoring and control. The counterpart is the rotation of goods .

detection

The range of goods , but also of semi-finished goods , intermediate goods and intermediate products is as follows:

{\ displaystyle {\ text {Range}} = {\ frac {\ text {Inventory}} {\ text {Outgoing stock}}}}

or

{\ displaystyle {\ text {Range}} = {\ frac {\ text {current stock level}} {\ text {average demand}}}}

.

It describes how long the stock lasts to cover the needs of the next production level , trade level , processing level or sales from existing stocks. Further subspecies are the supply range , stock and safety stock range . The reach of web shops results from the number of visitors to a website and the number of all internet users. Because the number of Internet users is difficult to determine, however, the informative value of this key figure is controversial.

For example, if the average inventory is 190,000 pieces per month and the consumption is 120,000 pieces, the range - without further procurement taking place - is 1.58 months.

economic aspects

The range determines the readiness to deliver in all sales chains and trade levels . Too little range causes delivery bottlenecks and shelf gaps , which has a negative effect on delivery service and customer satisfaction . Excess stock leads to optimal readiness for delivery, but increases storage risks through additional storage costs and reduces profits . In order to limit the storage and sales risk , a maximum permissible range can be set for each article. This limits the replenishment quantity and the safety stock if there is an excess of stock. The economic key figure of the range represents the tension between security of supply and increased storage costs.

Clear rules such as the ABC analysis or XYZ analysis help to optimize the range. The range also affects the cash-to-cash cycle from, ie the period of time between the payment to their own suppliers ( english cash out ) and payment by customers ( English cash in ) is located. In addition to shortening the payment term granted to customers, a high reach ensures an improvement in the “cash-to-cash cycle” and thus liquidity . Modern merchandise management systems take the range into account as soon as the target range is not reached.