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Buyer's Management
In today's competitive distribution environment, an effective Buyer's Management System must simultaneously analyze inventory positions, sales history and vendor performance. In turn, the system must give recommendations to inventory and purchasing managers. It must help them operate the business with the least amount of on-hand inventory, purchased at the lowest overall annual cost. The inventory must be of consistently reliable quality and be delivered on time, every time.
The unified design of the Alliance system combines these elements to forecast item sales demand for each warehouse. Supply of field warehouses from central and regional warehouses is time-phased. Purchases of items from vendors proceed according to defined parameters, such as targeted turn rates, safety stocks, and dynamic order quantities. This flexibility and control provides you with the best customer service at the lowest inventory costs.
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Average Cost Update
In addition to updating stock records, the PO receipt also updates the average cost of the item and its last cost if the cost update feature is active. This feature allows you to cost out subsequent customer shipments at last cost, average cost, or on a lot-for-lot basis.
When a location or lot-controlled item is received, the system automatically pops open a location/lot detail window requesting location put-away information, and allows the entry of a new lot number.
Alliance automatically subtracts the received quantity from the open PO quantity, whether the receipt is into stock or inspection. A Purchase Order can be closed without being fully received. You can over-receive a line, although the system displays a warning message if the over-receipt exceeds the pre-set limit percentage.
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Bill of Distribution Network
When managing a network of inter-dependent warehouses, you create a bill of distribution network relating the supply relationships among the warehouses. The time-phased order point logic works its way down through these relationships similarly to the bill of material explosion logic in Material Requirements Planning (MRP).
This process is called Distribution Requirements Planning (DRP).
DRP works best when there are advance sales order bookings, sales forecasts, or internal supplies from other warehouse and manufacturing plants. It also works well with outside vendor supplies when the vendor must be supplied with advance information about upcoming purchase orders.
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Buyer Wake-up Call
If buyers are not keeping up with their duties, Alliance offers both expedite reports of items, where available-to-sell quantities are falling below safety stocks and recommended action reports, where an item re-order trigger has been set.
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Comments
In addition to line items, a purchase order can have an unlimited number of comments that print by each individual line, or at the top and bottom of the purchase order form. Comments can print on the PO, on the receiving document, or just be internal to the purchase order records within the system.
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Cross-dock Support
Alliance facilitates cross-dock activities. Purchase receipts are turned into customer shipments by material handling personnel, avoiding the cost and time delay of receiving product into stock and then picking it as a back-order.
This feature can save two days on a typical warehouse turn and stop the confusion of trying to match shipping paperwork with receipts. It also helps eliminate errors inherent in the short cuts often taken to accomplish cross-docking without adequate systems support for this important activity.
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The Forecast Model
As an alternative to using sales demand history for invoicing, a forecast model can be run against bookings demand history when the forecast is generated.
If booking demand has been saved for the order type, the demand time series is original booking requests - before substitutions, before back-orders and at the booking time rather than shipment/invoicing time.
Forecasts based on bookings are most useful when a business has a seasonal time frame, frequent item substitutions, or frequent back-orders.
Forecast models are built around three algorithms:
- Simple average of history or bookings
- Weighted average of history or bookings
- Simple seasonal forecasting, where the past periods equal the starting point for the next set of periods.
Each model allows the user to define the number of periods in the historical time series, the number of periods to forecast forward, a trend factor on the forecast periods and a weighting factor to adjust the historical periods.
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Forecasting
Alliance maintains an unlimited amount of period-by-period demand history for each item in each warehouse. Three years of period information can be seen at any one time, based on the starting year specified on the Item History Screen.
This information is further subdivided into sales order demand, transfer demand, drop shipment history and adjustment activity. Order activity reaches the item subdivided history file based on the order type switch set in an order policy file.
For example, history can be accumulated for sales orders but not for order quotes or returned goods authorizations.
The forecasting programs read this demand history and use it as input to the unlimited number of forecasting models possible in Alliance.
Each item in each warehouse has a forecasting model in its Inventory Management record. In addition to the forecasting models, the inventory planner can key in a direct forecast on-line. Since each item in each warehouse can maintain two forecasts simultaneously, two different models, or one model and one manual forecast, can be used
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Inventory Management on the Item Master File
The Inventory Management parameters on the Item Master File can be set by item within each warehouse. For example, each item can have a different order point or a different replenishment lead-time for each warehouse.
The DRP flag is set for items planned through time-phased order points. Otherwise, the item is planned through order point and min/max management.
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Line Point
Alliance also calculates items that have reached their line point, an inventory level equal to the re-order point plus the usage quantity during the review cycle. Line point reviews help you to find items close enough to the re-order point to see if a replenishment purchase would qualify for a significant vendor purchase quantity discount.
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Matching Purchase Orders, Receivers, Vendor Invoices
The last step in the receiving process is initiating a computerized receiving record (the receiving log) along with a printed receiving ticket to aid in putaway and PO payment approval.
The receiving ticket is often sent to purchasing where a PO copy is pulled and compared to the receipt before sending both to Accounts Payable. The AP clerk matches the hard copy PO, receiving ticket, and vendors' invoice and retrieves the computerized receipt information directly into a vendor invoice entry screen, eliminating re-keying receipt data.
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Multiple PO Dollar Limits
A unique feature of Alliance is the ability to assign two-dollar limits to every PO. The first limit relates to the buyer and represents the purchase dollar authority for a single PO. The second limit is the purchase dollar limit for a given vendor . Purchase Orders go on hold and will not print if either limit is exceeded. Reports and on-line inquiries allow you to monitor this situation, release and print the POs
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The "Open" Closed PO
POs marked through the receiving screen as closed have a closed status on inquiries. However, a closed PO can be re-opened through the receiving function if a correction to a previous receipt is needed.
Purchase orders can be pegged to outstanding sales orders, in effect allocating the pending replenishment quantities ahead of filling any other back-order.
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Order Point Management
Alliance can automatically manage the order points or min/max positions of a purchased item based on the desired number of annual inventory turns and the calculated demand history of the item. When planned in this manner, the system calculates an average month's demand for each item and relates this demand to the desired number of turns when the item reaches its reorder point or its minimum stock level.
The inventory planner defines a series of inventory turn classes or review cycles and assigns each item to a review cycle. The planner also sets a safety stock for each item. Once Alliance calculates the average monthly usage (demand) for an item , it can calculate a re-order point or a minimum point consistent with the review cycle (i.e., desired number of turns). Alternately, you can set custom re-order points. The calculated order points and minimums are equal to the monthly usage times the lead-time, plus the safety stock level.
With this information, the system reviews items that have reached their re-order point and/or minimum quantity. Pending shipping requirements, purchase on order quantities and safety stocks also give the most accurate picture of whether the net quantity on-hand is at the re-order or minimum point.
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PO Formats
All items Alliance suggests for purchase are organized into proforma PO formats, organized by buyer and vendor. Within this format, the buyer can compare suggested purchases to vendor minimum weight, cube, and quantity rules.
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PO Types
Alliance lets you define the characteristics of each purchase order, using a purchase order type code. The type code controls automatic printing of POs and whether the PO is a purchase order, a request for quotation, a purchase contract, a direct ship to a customer, or an inter-warehouse transfer request.
In addition, POs can be coded to ship to a different address than your company 's receiving warehouse. For example, a shipment can be sent to a vendor who will perform some outside processing before sending the finished item to the warehouse.
Purchase contracts relate individual POs back to a master contract to enable you to review the total amount purchased to date.
Warehouse transfer POs are the way a warehouse requests transfer of product from another warehouse. Entry of this type of PO automatically generates a warehouse shipping order at another warehouse.
Direct ship POs are created automatically by sales order processing for each line item indicated as such on the sales order line.
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Purchase Order Entry
Alliance uses a single screen to guide the entry of purchase orders. For long POs, there is an option to shorten the upper heading information and to display more detail lines. Up to 1,000-purchase order lines can be entered on one PO for the same or different items. Each line can have a different date and warehouse if necessary.
This approach facilitates defining blanket orders by date or using a declining order balance approach. It also supports entering a new date for a new delivery. You can enter a revision number and date and reprint the revised purchase order to send to the vendor.
Entry of a supply/expense item requires the entry of a GL account number so the item is debited to the proper asset or expense account upon receipt.
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Purchase Order Processing
Alliance purchase orders can be used for buying inventory items, supply and expense items and creating transfers of inventory items among warehouses. The starting point for a purchase order can be one of the following:
- Direct data entry of PO and line items
- Conversion of a direct entry purchase requisition
- Conversion of item replenishment data based on analysis of demand history and desired turns
- Safety stock level and min/max
- Re-order point
Conversion of a purchase requisition generated by the system is based on a Distribution Requirements Planning analysis of finished goods levels, future orders and forecasts across all warehouses.
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Purchase Order Receiving
When receiving against a purchase order, the receiving clerk tells the system that product has arrived into stock or into an inspection area. The receiving transaction generates an on-line stock update and audit trail record, and creates a received/not -vouched GL debit transaction against the asset or expense account debit.
This debit helps you to close at month end immediately, without waiting for vendor invoices, or going through open POs to calculate a purchases received accrual amount. This feature alone can pay for Alliance in saved clerical time, effort and prevention of unnecessary errors.
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Purchase Requisitions
You can create, maintain, or delete a purchase requisition for an inventory item or supply/expense item that is not stocked in inventory. When entering a requisition, the operator indicates approval, vendor, price and delivery information. Later, these requisitions can be reviewed and incorporated into a purchase order without re-keying the purchase item details.
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Purchasing Overview
The Alliance Purchasing System handles all purchasing requirements with one system.
Alliance Purchasing supports purchase requisitions from departmental requesters, re-order point and min/max strategies for warehouse replenishment, special purchase, direct-ship items, and non-inventory items such as office supplies and services.
The Alliance Purchasing System also covers blanket orders with multiple ship dates and quantities, purchase orders delivered to a non-warehouse address, the accumulation of individual POs against a master contract, and the automatic generation of purchase orders for items sold in sales order entry as drop shipments.
Within Alliance Purchasing action bars and option transfers provide direct access to:
- Vendor information
- Item information
- Vendor/item information
- Receipt processing
- Direct ship processing
- Vendor performance history
- Inventory management parameters and planning factors
- Forecasting models and results
- Time phased order point planning
- Distribution requirements planning
The Buyer's Management System also includes on-line inquiries into purchase requisitions, open and closed POs, receipts, and demand history. Inquires and reports also guide staff through expediting open purchase orders, analysis of vendor performance and prediction of cash disbursements.
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Quote-as Vendor
The quote-as vendor can be a different vendor that controls the purchase quotation prices available for the purchase order vendor. On this screen, you would enter quotations from vendors regarding effective delivery dates and minimum purchase quantities for specific items.
The PO entry function automatically uses these quotations for pricing POs. However, quotations are not required and the Purchase Order Entry function can use an item cost from the cost file, accept an input price, or work with no price at PO entry time if there is no valid quotation on file. There is an on-line inquiry and a report of all open vendor quotations.
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Receiving and Vouching Direct-Shipment POs
Alliance Order Entry automatically creates direct-shipment purchase orders when the Item Master record is marked to direct-ship the item, or when the order entry operator overrides the direct-ship code on the sales line item.
Later, when the vendor ships the item and sends notification, the order entry clerk can use direct-ship receipt processing to simultaneously:
- Acknowledge the vendor shipment, creating a receipt to be vouched
- Invoice the customer for this item
- Initiate an A/P voucher in a special drop shipment batch
The direct shipment processing receipt accomplishes all three steps from one screen. A separate batch process uploads the AP voucher batch into the AP system in either an open (modifiable) status, or in a closed status ready for payment processing.
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Receiving Into Inspection
After product is received into inspection, the inspected quantity can be moved into stock, or turned into full or partial returns to vendor and scrap transactions. A return-to-vendor re-establishes the pending receipt on the purchase order line.
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Remit-to, Quote-as Vendor
On the Vendor Master Maintenance screen, each vendor master record establishes a relationship with a remit-to vendor and a quote-as vendor. If different than the purchase order vendor, the remit-to vendor record points to an additional record containing details needed to pay for purchases. This information includes the payment terms code, 1099 identification, a purchase order and payment authorization limit, and a parameter for determining the type of payment check stub.
All open payables will be in the name of the remit-to vendor. Consequently, both the purchasing department and the accounting department use a single Vendor Master File, minimizing file maintenance problems, and leading to better corporate control of valuable vendor history information.
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Replenishment Management
Alliance Buyers Management offers the user two distinct alternatives for managing each item in inventory:
- Time-phased order point processing based on future orders and sales forecasts including Distribution Requirements Planning (DRP)
- Automatic order point and min/max management based on desired turns and order demand history
The choice is entirely up to you and can vary by item by warehouse.
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Replenishment
Alliance automatically stores each replenishment request as a purchase order requisition, a transfer order requisition, or a planned manufacturing work order, depending on a make/buy switch in the item/warehouse record.
Warehouse transfers are calculated if the bill of distribution specifies that the demanding warehouse be replenished by another warehouse, rather than from a vendor or a manufacturing facility.
Inventory planners using Alliance are responsible for reviewing an action report of required replenishment, and turning each one into a warehouse-to-warehouse transfer, a purchase order, or a manufacturing work order.
The purchase and transfer requirements become purchase requisitions within Alliance. The inventory planner can pull them into the purchase order without any re-keying effort.
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Search By Most Data
Vendors can always be found by number, name, any character string within their name, and telephone number or zip code. It is no longer necessary to know a vendor 's number or to use old-fashioned alphabetic short name vendor numbering schemes when building the Alliance Vendor Master File. A vendor search window pops up automatically whenever a search for a vendor begins if the complete vendor number is not known.
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Special Vendor Information
Vendor item numbers, defined in a cross-reference file, can be used for the on-line entry of purchase order lines. The Alliance Purchasing Application translates the vendor number to a stocking item number. The system can print both numbers on purchase order forms.
The purchase unit of measure comes from the Item Master File. An unlimited number of purchase units for each individual item can be searched during PO entry.
Alliance takes care of the conversion to stocking units at receiving time. The Item Master File stores the primary conversion, and a conversion table file stores the conversions for every item.
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Time-Phased Order Points
Time-phased order points represent a simple method of projecting the on-hand inventory forward in time based on the starting inventory, the advanced sales order bookings, and the item's sales forecast. The greater of bookings or forecast is considered to be the demand for each forward period, or month.
In addition, any pending warehouse-to-warehouse transfer requirements and any work order allocations for spare parts are added to this demand to equal the total requirements or demand by period. The projected inventory is a subtraction of total demand, period by period.
By refining the inventory projection to a quantity by individual day, Alliance calculates when the projected inventory will reach its safety stock level. At that point, the time phased order point programs automatically suggest that a replenishment quantity reach the warehouse on the same date.
The planned or suggested replenishment is found through one of three methods selected by the user for this item in this warehouse:
- A fixed quantity or multiple of a fixed quantity.
- A discrete, variable amount equaling the demand in the next period (month).
- A discrete, variable amount equaling the demand in the next "N" periods. The number of periods is set in the item/warehouse inventory management record.
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Tracking Purchase Orders
Alliance tracks open purchase orders by number, vendor, item and due date, all by receiving warehouses. Inquiries and reports can display and list open and closed POs in these ways. You decide each month how many months of closed POs to keep on-line. There is no system limit.
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Usage Classes
As an additional management tool, Alliance calculates an item usage class based on an item's annual total usage cost. Sometimes known as an "ABC" code, Alliance prepares the distribution by ranking items according to descending usage cost, and sets class break points by usage dollar value, or by percentage of items that should be in each class.
For example, the top usage class could be composed of the top 20% of the item numbers in terms of total usage cost.
Studying usage class reports by warehouse and buyer can help pinpoint items that need the most frequent attention, compared to those items that can be managed with minimal attention.
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Vendor Information
The Vendor Master Maintenance screen is used to add, change and delete vendor master information. This screen contains name, address and telephone information, along with defaults for vendor shipping preferences, freight terms and other purchase order parameters.
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Vendor Notes
In addition to maintaining the Vendor Master File, an unlimited file of notes and follow-up dates can be set up for each vendor. Although the Alliance Purchasing Application does not currently utilize these notes, Alliance's object-oriented programming techniques and unified relational database make it easy to incorporate the Vendor Notes File into inquiries, reports, and other programs.
In addition, the Vendor Notes File is always available for entry or review through an action bar transfer.
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Viewing Vendor/Item Purchase History
The buyer can alternately view vendor/item purchase history, including delivery performance and vendor reliability statistics. Six different views of the item balance file are available, all sorted by vendor. Three are sub-sorted by warehouse and item family group, and three are sub-sorted by family group before item and warehouse.
Finally, the buyer can simply tick off the items recommended for purchase, turning the system suggestions into actual POs. The system also lets the buyer raise the suggested purchase amounts in order to achieve vendor minimum rules.
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