The order point system (also order point procedure) is a subrange of the order policy. It belongs to the consumer-oriented order procedures, which can be divided again into order point system and order rhythm system.

Characteristics

The order point is the order quantity, which is necessary, in order to cover that need, which will presumably arise between the order release and the supply in the camp. During each stock issue we examined whether the time for the supplementory order is reached. The new supply must be in the most favorable case at the camp, if the safety stock amount straight is reached.

One orders, if the camp dropped to a certain minimum quantity. Certain minimum stocks ("notifiable stock level") and the order quantity are specified. If minimum stocks (s) are fallen below, one orders. Minimum stocks are that quantity, with whose reaching a message is passed on to the purchase department, and an order to make is. For the order point procedure thus firm order quantities (q) and variable order dates are characteristic. This order policy is called also (s, q) - politics or order point lot size politics. In addition, there is the possibility that order quantity and order period are variable. One calls this also (s, S) - the policy or order point camp level politics. In this case the order quantity depends not only on reaching and/or falling below the notifiable stock level (s), but also on planned stocks (s), which is to always be in stock. Both Politiken require a constant observation of the stock.

The firm order quantity is defined as optimal order quantity.

optimal order quantity = \ sqrt {\ frac {200 * annual requirements * firm order costs/order} {price/quantity unit * (interest rate + warehousing cost tariff)}}

or:

optimal order quantity = \ sqrt {\ frac {2 * annual requirements * firm order costs/order} {price/quantity unit * (interest rate (%) + warehousing cost tariff (%))}}

Computation of minimum stocks

BP = DATA PROCESSING * BZ + SELF-SERVICE

BP = order point, minimum stocks; Data processing = average consumption per time unit; BZ = procurement time area; SELF-SERVICE = safety stock amount

Possibility for the determination of minimum stocks

• Order only after complete consumption

The reporting quantity amounts to zero. One orders, if the supply is completely used up. This procedure way is possible only if the suppliers supply very fast, and the shortfall costs are very small.

• Order after reaching the safety stock amount

The safety stock amount is so largely selected that with average consumption and with average procurement time no gap in the supply arises. Also with this procedure the danger exists that it comes to shortfalls. The daily need can lie during the procurement time over the average. The average procurement time can be exceeded by the supplier.

• Order after reaching a safety stock amount, which is increased by a "iron existence".

If a shortfall in any case must be avoided, then the safety stock amount is increased by a "iron existence" (e.g. with materials and referred parts, without which production could not be resumed). The iron existence is attacked only if the daily need rises during the procurement time over the average or if the average procurement time is exceeded.

Safety stock amount

Is that existence, which should be constant in stock, and which is to catch Unterdeckungen in the time of the order point up to the availabilty of the commodity. It is needed normally not for the manufacturing by materials, and represents thus a buffer, which is to ensure delivery readiness of the enterprise with delivery difficulties or other losses. The safety stock amount covers 3 uncertainties: Need uncertainty (determined need is not correct with the daily need) delivery uncertainty (target delivery time is not correct with the actual delivery time) need uncertainty (book inventory with stock do not agree)

Each enterprise can be specified the safety stock amount individually after own discretion, and determined differently. (e.g. average consumption within the replacement time area) there the safety stock amount permanently storage costs caused, he should be as small as possible.

The diagram illustrates the procedure again graphically:

Comparison to the order rhythm system

Since during each stock issue the stock with the notifiable stock level is controlled, short term need fluctuations can be better considered, because no fixed order intervals are given. Shortfall costs can be so more easily reduced, if the notifiable stock level is accordingly highly set. Costs arise however particularly by the increased control expenditure. Stock program costs and thus an additional capital freeze depend on the height of the safety stock amount and/or the notifiable stock level.

See also

Stock management, procurement logistics, order rhythm system

Sources of literature

• Whe: Introduction to the general management economics. 15. Edition. Munich 1984, ISBN 3800610728
• Werner core: Hand dictionary of the production economy. Stuttgart 1979, ISBN 3791080172
• Oskar green: Industrielle stock management. In: Marcell Schweitzer (Hrsg.): Industrial company teachings. 2. Edition. Munich 1994, S.447-568, ISBN 3-8006-1755-2

Articles in category "Order point system"

We found here 7 articles.

Related Websites

We found here 4 related websites.

• Glossary of Manufacturing: Page 'O' of a glossary describing 1500 ...
  The order point system is also called the Min / Max System because the stock ... Use of the order point system is valid only if the fall in stock level of ...


• Point of order: critics say the current points system places too ...
  Point of order: critics say the current points system places too much emphasis on consistency and not enough on wins


• Point of order: critics say the current points system places too ...
  'Point of order: critics say the current points system places too much emphasis on consistency and not enough on wins


• Point of order: critics say the current points system places too ...
  Point of order: critics say the current points system places too much emphasis on consistency and not enough on wins