Days 18-19

I've spent the last couple of days trying to determine how the suggested triggers are calculated. A trigger is the amount of inventory that is on hand before the ordering system generates an order automatically. There are three basic factors that go into this calculation. They are lead time, order cycle and safety stock.

The order cycle is the amount of time between orders. So if you order every two days the order cycle is 2. This is used together with the weekly forecast to estimate the amount of product you will need on hand while you are waiting to order again.

The lead time is the number of days between the time that you order and the product goes on the shelf. So, if you get a truck in 5 days after you order, the lead time is 6. This is because the inventory doesn't get stocked until the night crew has a chance to stock it. This is used together with the weekly forecast to determine how much product you need on hand before you get more product on the shelf.

Safety stock is determined by the variance in the movement of an item. The more variable the movement, the higher the safety stock amount. This idea can easily be referenced in a statistics class when talking about variance.

I think there are some more factors that I haven't located yet. I'm pretty sure that when you order helps determine these factors because every vendor has a profile that shows when they sell the most product during the week. These values are somehow incorporated into the calculations.

My idea for the classroom, is to use the simplest forecasting model and movement data to have students calculate triggers. A colleague had an idea of using this in conjunction with a fundraiser. The students could sell something and keep track of what they've sold. They can identify peaks in their data and see if they can determined any event that may have caused the spike, a pep rally for example.