Setting Target Inventory Levels

Operations planning calculates global target inventory levels to support an item’s sales forecasts. In turn, it calculates production requirements based on target inventory levels.

If you do not specify otherwise, the system automatically sets each week’s target inventory level to zero. In this case, you cannot build up inventory for future demands. You also cannot anticipate inventory shortages or surpluses.

There are three methods to establish global target inventory levels for end items:

• Calculate target inventory levels based on production demands exploded from the family plan. This is an easy method for items initially planned at the family level. No additional setup is required.

• Calculate target inventory levels based on manually recorded quantities. This method is precise. However, it is hard to maintain this information for many items because it changes constantly. Also, it offers no visibility to project shortages and surpluses.

• Calculate target inventory levels based on upcoming sales forecasts (weeks of coverage). For this method, you define global weeks-of-coverage factors for minimum, average, and maximum target inventory levels. This method requires more implementation effort. However, it does support inventory buildup for upcoming sales forecasts.

Note: You can define coverage factors for either top-level family items or end items. However, to prevent the system from inflating inventory, do not set up coverage factors for both levels or for intermediate subfamily levels.

Weeks of Coverage on Operations Plan illustrates how the system uses coverage factors on the operations plan. In the example, the system uses an average coverage factor of 2.0 to calculate the target inventory level.


No.	Sales Forecast	Target Inventory	Production Due	Projected QOH	Coverage
1	0	500	500	500	2.0
2	300	700	500	700	2.0
3	200	500	0	500	1.0
4	500	0	0	0	0.0

When you change production due quantities on the plan, it uses the minimum (–) and maximum (+) factors to alert you to potential inventory shortages and surpluses relative to the average coverage level. This is illustrated in Weeks of Coverage on Operations Plan—Production Due Quantities Changed, which assumes a minimum coverage of 1.0 and a maximum of 3.0.

Weeks of Coverage on Operations Plan—Production Due Quantities Changed


No.	Sales Forecast	Target Inventory	Production Due	Projected QOH	Coverage
1	0	500	200	200	0.7	–
2	300	700	500	400	1.4
3	200	500	0	200	0.4	–
4	500	0	0	–300	0.0	–

There are two ways to load target inventory quantities manually:

• If you have already recorded target inventory quantities in a non-QAD database, use Item-Site Data Maintenance (33.13.3) and Item-Site Data Consolidation (33.13.6) to load them.

• Manually record quantities using Inventory Data Maintenance (33.13.17).

See Data Collection.

To set up generic and date-specific coverage factors for end-items, use the same programs described for setting up families. In the Item Number field, enter the end-item number. Coverage factors must be positive numbers. They can be either whole numbers or decimals.