To compute average projected-inventory levels

Several performance indicators in the Resource Analysis and Optimization module of Enterprise Planning are computed as an average measure of the level or value of the projected inventory. This applies to the following indicators:

  • The average projected inventory for a plan item or a range of plan items
  • The average value of the projected inventory for a plan item or a range of plan items
  • The average negative projected inventory for a plan item or a range of plan items
Average projected inventory quantity

The projected inventory for a plan period, which is displayed in the Item Master Plan (cprmp2101m000) session, is actually the projected inventory at the end of that plan period. For the purposes of computing average projected inventory levels, LN assumes that changes of inventory level from one plan period to the next proceed in a linear fashion.

Refer to online manual topic Example of linear progression for more information on this computation method.

This assumption of linearity means that the average inventory level of a plan period can be computed as the mean of:

  • The level at the end of this plan period.
  • The level at the beginning of this plan period, which is equal to the level at the end of the previous plan period.

The average projected inventory of a plan item is computed as the weighted average of the average inventory levels found for the various plan periods. This average is a weighted average in that it takes the length of each plan period into account.

Refer to online manual topic Example of a weighted average of the inventory level for more information on this calculation method.

Average projected inventory value

Once the average projected inventory quantity of a plan item has been determined, the average inventory value is computed as follows:

Average projected inventory x material cost

See the Material Costs field in the Item - Costing (ticpr0107m000) session.

Average negative projected inventory

The computation of the average negative projected inventory is based on principles similar to those of the average projected inventory computation (see above). An important difference, however, is that for the computation of average negative inventory, LN only considers those stretches of time during which the projected inventory is negative.

First of all, an assessment must be made of when exactly the projected inventory is negative. For this purpose, LN again assumes that the changes in projected inventory from one period to the next proceed in a linear fashion. LN uses this assumption to pinpoint the moment when the projected inventory turns from positive to negative, or from negative to positive.

Note

The turning point involved does not have to coincide with a boundary between days. For instance, if a certain plan period consists of five days, the turning point from positive to negative can be assessed at 2.39 days after the start of the plan period. In the same instance, the change back to positive could occur 4.27 days later (that is, 1.66 days after the start of the next plan period). In this case, the number of negative inventory days in these plan two periods would be 4.27 (2.61 days in the first plan period and 1.66 days in the second plan period).

Once the exact periods of negative inventory have been determined, the average negative projected inventory is computed in a way that is similar to the overall average inventory computation. In other words, a weighted average is computed that takes the length of the various periods with negative inventory into account.

For more information about the corresponding calculation method, refer to online manual topic Example of a weighted average of a negative inventory level.