Target line buying
Target line buying takes advantage of discounts that are offered by vendors when certain minimums are met, such as amount, quantity, weight, or cube. For example, a vendor may offer free freight when you spend $1000 or more on one purchase order. Records are set up to define what constitutes a product line. Product Line Setup records should be created for each group of products that, when purchased together, achieve a freight-free purchase, volume discount, or any other type of discount. After the product line record is set up, you tie each Product Warehouse Product Setup record to its associated line.
Defining a product line is dependent upon the target. If the target is $1000 worth of goods from a specific vendor, then your product line is all products that are purchased from that vendor. If the target is a quantity of 200 widgets, then widgets would be a product line. The only time a product line would not be target driven is when a vendor does not allow you to mix products on one purchase order. Those items that must be on their own purchase order should become a separate product line.
Review cycle
Another important aspect of product lines and targets is the review cycle. This reflects how often you plan to review the product line. It is set up in Product Line Setup and applies to all products that are tied to a product line. The review cycle is used when you run the Purchase Entry Recommended Replenishment Action Report in Purchase Demand Center Entry as one of the qualifiers for when a Purchase Entry Recommended Replenishment Action Report may be generated for that product line.
Because of the importance of the review cycle in the replenishment process, review it regularly and make adjustments if required. Review cycle is recalculated each month in the Product Administration Review Cycle Adjustment Report as part of a well-managed month end routine. The calculation for review cycle days is 365 ÷ (Total Annual Purchases ÷ Target Amount).
By dividing the target into the total annual purchases, you find how many times a year you can expect to make target. Dividing that into the days in a year gives you the days within each review cycle. From this, you can see that if no target is set up in Product Line Setup, the review cycle is never updated. This discussion is only relevant to product lines that have a target purchase amount set up. For those product lines that do not offer discounts or free freight opportunities, look for other cost saving methods such as Economic Order Quantity (EOQ).
Adjusting the review cycle in the Purchase Demand Center Entry
You can also manually adjust the review cycle in Purchase Demand Center Entry to meet a target line buy. This is a temporary adjustment that does not update the review cycle days in Product Line Setup. When you enter a new review cycle days in the Increase/Decrease section on the Header view of Purchase Demand Center Entry, the Product Administration Month End Processing Report runs to recalculate ordering controls, and then a new Purchase Entry Recommended Replenishment Action Report is generated to reflect the changes. This processing is performed in the background, and does not disrupt your work. When the new Purchase Entry Recommended Replenishment Action Report is complete, check if the new review cycle puts you closer to target.
Order quantities on the Purchase Entry Recommended Replenishment Action Report may be affected by an increase in review cycle days because the line point is raised, possibly increasing the order quantity if the half-way rule is applied when the report is generated. This rule states that if a product’s purchasing net available is below line point plus order point, divided by two, and the product is a class 1-4 item, a greater quantity is recommended. The rule is applied if Yes is selected for the Apply Halfway Rounding Rules option on the Purchase Entry Recommended Replenishment Action Report .
Additional products may be included on the Purchase Entry Recommended Replenishment Action Report if the review cycle days are increased because any item with a purchasing net available below line point would qualify.