Product Administration Review Cycle Adjustment Report overview

• 7.3 days = (365 / $350,000 purchased in the last 12 months) / $7,000 Truckload order gets freight paid

In the example, the review cycle is approximately once a week. Correctly determined review cycles and the corresponding line points offer a predictable and profitable approach that ensures that line buying savings do not disappear due to excessive inventory carrying costs.

The review cycle days is a critical component in the line point calculation for each product in the product line. The line point for each product can be recalculated each time the Product Administration Month End Processing Report is run. The Product Administration Month End Processing Report is performed on a monthly basis. The review cycle can be recalculated less frequently. Perform the review cycle adjustment quarterly, unless a series of purchases indicates the current review cycle is too short or too long.

For each product line, purchase history information for each vendor is used to determine the number of months of purchase history. A product line is included in the review cycle adjustment unless it meets one of these conditions:

• Has less than a six-month purchase history, or less than a 12-month purchase history for seasonal product lines
• Has a target level amount equal to zero
• Is a frozen product line

Current review cycle information for frozen product lines is included on the report, but the review cycle is not updated based on the information .

The review cycle days are recalculated, based on annual purchase amounts versus the target amount. To qualify for the review cycle calculation, a product must have at least six months of purchasing history. The review cycle days are calculated on the current year's purchase history of the vendor for a 12 month period. If less than 12 months of history are available, the annual purchase amount is extrapolated so that 12 months of purchase history is used in the review cycle calculation.

Purchase history

This formula is used to calculate the purchase history amount:

• Purchase History = Purchases to Date * ( 12 / Months of History )

Example

This table shows seven months of history from Purchase History Setup:

Period 1:	10,000
Period 2:	9,000
Period 3:	8,000
Period 4:	9,500
Period 5:	10,000
Period 6:	12,000
Period 7:	11,500
Purchases to date:	$70,000

Using the purchase history information from the table, this is purchase history calculation is performed:

• $120,000 = 70,000 * (12 / 7)

Total purchases

This formula is used to calculate the total purchases amount:

• Total purchases = Purchase history amount * ( Total quantity / Total amount)

Example

• 720 = $120,000 * ( 12 / $2,000)

Review cycle days

This formula is used to calculate the review cycle days:

• Review cycle days = Days in season /(Total purchases / Target amount)

Example

• 8 = 365 / (720 / 15)

The target amount can be based on total amount, total weight, total quantity, or total cubes. After the total purchases is determined, the review cycle days in and out of season is calculated. In the example, the product is not seasonal, so the number of days in season is 365 days of the year. The number of days is divided by the number of times to purchase each year to determine the new review cycle days. If the review cycle days is less than .5, it is rounded to 1. If the review cycle days is greater than 999, it is rounded down to 999.

Typically, review cycles should not be longer than one month. For seasonal products that are out-of-season, you can have a longer review cycle. If a product line is seasonal, only the out-of-season review cycle is included on the report.