Why the Replenishment Max Quantity Can Get Big if the Replenishment Calculation Period Is High?

(Doc ID 814670.1)

Last updated on AUGUST 12, 2016

Applies to:

PeopleSoft Enterprise SCM Inventory - Version 7.5 and later
Information in this document applies to any platform.


When running the 'Calculate Replenishment Parameters' process (IN_RPL_PRM) for an Item for which the 'Reorder Point Replenishment' and 'Min/Max' check boxes are selected, the system is using the following formulas to calculate the Max and Reorder Point quantities:

Reorder Point quantity = ((sum of the demand during calculation period * lead time) / calculation period) + safety stock

Max quantity = average daily demand for the calculation period * (lead time + calculation period) + safety stock

See also the following PeopleBooks chapter: PeopleSoft Enterprise Inventory 9.0 PeopleBook > Replenishing Inventory > Creating and Modifying Replenishment Requests > Defining Replenishment Parameters

When the Replenishment Calculation Period is high, the system can calculate a big Max quantity even if the Lead Time is low. Why is that?

Let's take the basic following example:

Replenishment Calculation Period = 365 days
Year demand: 100
Lead Time: 2 days
Safety stock: 20

Reorder Point quantity (Min quantity) = 21 [= 100 * 2 / 365 + 20]
Max quantity = 121 [= 100 / 365 * (2 + 365) + 20]

If there's a demand of 100 for a year, why would you want to carry a quantity of 121? Especially with a Lead Time of 2 days.


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