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<h2>In this article</h2><p>we will discuss the importance of lead times for your suppliers and products, how and where to use it and how it is used in the Order Proposals.</p><h2>What is Lead Time?</h2><p>Lead times are a crucial concept in retail, impacting how businesses plan, manage inventory, and meet customer demand. In this article we’ll provide you with an overview of how lead times work for a retailer and how you can make the most of them in your inventory management.</p><h2>3 Levels of Lead Times</h2><p>Shelf Planner allows you to set lead times on different levels:</p><ol><li>Default Lead Time</li><li>Lead Time by Supplier</li><li>Lead Time by Product</li></ol><p>If no lead time is set by Product (SKU), the Lead Time by Supplier will be used. If no Supplier lead time is set, the Default Lead-Time is used:</p><figure class="image"><img src="https://dev.azure.com/ShelfplannerAB/1499ee9a-419b-4f74-949f-70aa11edf418/_apis/git/repositories/911642ba-b90e-4b8a-a7af-26b9ff79e340/Items?path=/.attachments/image-9e4af1e1-dc70-4a11-aadc-defe7d946858.png&amp;download=false&amp;resolveLfs=true&amp;%24format=octetStream&amp;api-version=5.0-preview.1&amp;sanitize=true&amp;versionDescriptor.version=wikiMaster" alt="image.png"></figure><p>This cascading logic basically means that if you don't want to set up a lead time for each product, the replenshment proposals will be calculated using the Lead Time by Supplier.</p><p>At the same time, if you don't have a lead time set by supplier, the calculations will use the Default Lead Time.&nbsp;</p><p>We recommend to at least use a <strong>lead time by Supplier</strong> to improve the order proposals.&nbsp;</p><h2>Default Lead Time</h2><p>The default Lead Time is set in the <strong>Settings</strong> page.&nbsp;</p><figure class="image image_resized" style="width:60.92%;"><img src="https://cdn-assets.productfruits.com/4be1c680-009d-4de9-a1c1-21c12ca93f01"></figure><p>&nbsp;</p><h2>Lead Time by Supplier</h2><p>The Lead Time by Supplier is managed in the Supplier Settings on the Supplier pages.&nbsp;</p><p>When you enter or update a Supplier, you can set the Lead Time for all product you carry from this supplier:</p><figure class="image image_resized" style="width:71.88%;"><img src="https://cdn-assets.productfruits.com/b2cf8433-5dd9-4fee-84b0-8a42a48fa442"></figure><p>&nbsp;</p><h2>Lead Time by Product</h2><p>On the Product Settings page, you can open the edit function with the pencil icon:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/4b6a3124-1869-443c-af95-8816acf64527"></figure><p>A popup appears for the item with the values you can change the Lead Time for the individual product:</p><p>The number represents the <strong>amount of weeks</strong> it take for a supplier to deliver the goods to your warehouse.&nbsp;</p><figure class="image image_resized" style="width:63.89%;"><img src="https://cdn-assets.productfruits.com/0c15738c-8f08-407f-a631-205983f26381"></figure><p>The Lead Time by Product overrides the Lead Time by Supplier and also the Default Lead Time for your store.</p>

<figure class="table"><table><tbody><tr><td style="background-color:#f2f2f2;padding:20px;text-align:center;">Before the Order Proposals and the Replenishment report for your store are generated, you will need to set up <a href="https://support.shelfplanner.com/en/article/lead-times" target="_blank" rel="noopener noreferrer">Lead Times</a> and <a href="https://support.shelfplanner.com/en/article/weeks-of-stock" target="_blank" rel="noopener noreferrer">Weeks of Stock</a> for your store.</td></tr></tbody></table></figure><figure class="image"><img src="https://cdn-assets.productfruits.com/004faec7-ad3a-4228-a1a8-a7b598a75c39"></figure><h2>Order Proposal based on Ideal Stock</h2><p><span style="background-color:rgb(251,251,251);color:rgb(51,65,85);">The Shelf Planner engine uses your sales forecast for the coming weeks to understand whether you are understocked, or overstocked.</span></p><p><span style="background-color:rgb(251,251,251);color:rgb(51,65,85);">You do not necessarily want to replenish all the items in your store. You can select a single item or place multiple orders for the same item over time.&nbsp;</span></p><p>In the example below, the Order Proposal for the selected product is 416 units (<span style="color:hsl(210,75%,60%);">4</span>). This number is based on:</p><ul><li>Ideal Stock (<span style="color:hsl(210,75%,60%);">1</span>) for the product (based on product parameters and sales forecast)</li><li>Current Stock (<span style="color:hsl(210,75%,60%);">2</span>) - your current inventory, synced with your store)</li><li>Inbound Stock (<span style="color:hsl(210,75%,60%);">3</span>) - any incoming orders that you placed</li></ul><figure class="image"><img src="https://cdn-assets.productfruits.com/570b4179-1030-4108-b546-7587695b6d3e"></figure><h2>Order Proposal based on Minimum Stock</h2><p>For some of your products, it can be difficult to create an accurate forecast. Examples could be newly launched products, items with random sales, or items with extreme seasonality.</p><p>Our machine learning algorithms will pick up this behaviour and highlight these items in that case. For some of these products, it might be better to set a Minimum Stock threshold instead of using the Ideal Stock for the Order Recommendations.&nbsp;</p><h3>Set Minimum Stock</h3><p>To set a minimum stock, open the products settings:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/ba4054c8-cc6d-4f56-956a-2a5d4c7920bb"></figure><p>In this example, we set the Minimum Stock to 750 units. Instead of using the Weeks of Stock and the Lead Time to define the order proposals, the Min Stock is used to determine the Order Proposal:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/beae2060-8b6c-4f6a-9c16-8fcce899cfb7"></figure><p>As shown in the example above, the current stock (<span style="color:hsl(210,75%,60%);">1</span>) is 514 units. There is no incoming Stock (2). Becuase the minimum is set to 750 units, the Order Proposal is 750 - 514 = 236 units.&nbsp;</p><p>The Weeks of Stock (<span style="color:hsl(210,75%,60%);">4</span>) is in this example ignored.&nbsp;</p><p>When we set the Minimum Stock back to 100, the Order Proposal is recalculated:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/0058b977-3121-4725-86d2-85acef4f41d1"></figure><p>The Min Stock is now set to 100 and the Ideal Stock is using the Weeks of Stock and Lead Time (<span style="color:hsl(210,75%,60%);">1</span>). With a Lead Time of 2 and a Weeks of Stock setting of 6 weeks, the Ideal Stock uses 6 weeks of Sales to calculate the Ideal Stock, in this case 426 units:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/538b9f99-5d1d-4388-b304-4ce237af1b2a"></figure><p>As you can see in the example below, the Forecast for the next 8 weeks is 593 units, hence the Weeks to Stock out is 7 weeks and technically, this item is 'overstocked':</p><figure class="image"><img src="https://cdn-assets.productfruits.com/2cac5ba5-a1ca-458e-8197-6b29553c9804"></figure><p>&nbsp;</p><p>&nbsp;</p>

<h2>Weeks of Stock</h2><p>Weeks of Stock, also known as Weeks of Cover, is a key metric used in inventory management, supply chain planning, and retail analysis. It measures the expected duration of time that existing inventory will last, given current demand levels and sales rates.</p><p>Here's a breakdown of the concept and its uses:</p><h3><strong>How is Weeks of Stock Calculated?</strong></h3><p>Weeks of Stock is calculated by dividing the total inventory on hand by the average weekly demand or sales. The formula is typically:</p><figure class="image"><img src="https://cdn-assets.productfruits.com/6fd4ac63-4ddb-4848-9a83-b6a7d1899c3d"></figure><ul><li><strong>Total Inventory</strong> is the current amount of stock you have on hand.</li><li><strong>Average Weekly Demand</strong> is the average amount of product sold per week, which is usually derived from historical sales data.</li></ul><h3><strong>What Does Weeks of Stock Represent?</strong></h3><p>This metric represents the number of weeks that the existing inventory will cover based on current sales rates. A higher value indicates a more extensive stock level relative to demand, which can suggest overstocking or slow sales. A lower value might suggest understocking, increased risk of stockouts, or high demand.</p><h3><strong>Where is Weeks of Stock Used?</strong></h3><ul><li><strong>Inventory Management</strong>: Companies use this metric to gauge if they have too much or too little inventory. It helps in deciding when to reorder stock or when to run down inventory.</li><li><strong>Supply Chain Planning</strong>: Weeks of Stock assists in assessing whether the supply chain has the right balance of inventory, considering lead times, demand variability, and safety stock.</li><li><strong>Retail</strong>: Retailers use this metric to evaluate inventory levels across different product categories. It informs decisions on promotions, markdowns, or reordering.</li><li><strong>Production Planning</strong>: Manufacturers use this metric to align production schedules with demand, ensuring that they produce the right quantity at the right time.</li><li><strong>Financial Analysis</strong>: Analysts use Weeks of Stock as an indicator of inventory turnover and cash flow tied up in stock.</li></ul><h3><strong>What are the Implications of Different Values?</strong></h3><ul><li><strong>High Weeks of Stock</strong>: Indicates that inventory turnover is slow. This could suggest overstocking, tying up capital, or excess inventory costs. It might lead to product obsolescence, spoilage, or markdowns.</li><li><strong>Low Weeks of Stock</strong>: Suggests rapid inventory turnover, indicating potential stockouts, missed sales opportunities, or customer dissatisfaction due to unavailability.</li></ul><h3><strong>Conclusion</strong></h3><p>Weeks of Stock is a valuable metric for managing inventory, optimizing supply chain processes, and improving customer satisfaction by ensuring the right amount of stock is available. By monitoring this metric, companies can make informed decisions about inventory levels, reduce costs, and enhance overall efficiency.</p>

<h2>Ideal Stock</h2><p>The Ideal Stock is one of the key metrics used in this extension. It represents the stock you should have at your disposal to meet your customer demand. It is sometimes also referred to as Model Stock.</p><p>Simplified, the Ideal Stock takes into account these two parameters:</p><ol><li>Customer Demand Variation (for example, your actual demand exceeds your original sales forecast)</li><li>Supplier Delivery Variation (for example, supply deliveries are later than originally planned lead times)</li></ol><figure class="image"><img src="https://cdn-assets.productfruits.com/45de0411-3efc-48fc-a0de-d4ca6907ec57"></figure><p>&nbsp;</p><p><span style="background-color:rgb(255,255,255);color:rgb(16,21,23);">As illustrated in the image above, the Ideal Stock is determined by the </span><a href="https://support.shelfplanner.com/en/article/weeks-of-stock"><strong>Weeks of Stock</strong></a><span style="background-color:rgb(255,255,255);color:rgb(16,21,23);"> and the </span><strong>Lead Time</strong><span style="background-color:rgb(255,255,255);color:rgb(16,21,23);"> for the product. Both of these </span><a href="https://support.shelfplanner.com/en/article/forecast-settings"><strong><u>parameters</u></strong></a><span style="background-color:rgb(255,255,255);color:rgb(16,21,23);"> are set in weeks.&nbsp;</span></p><p><span style="background-color:rgb(255,255,255);color:rgb(16,21,23);">For example, if you want to keep 6 weeks of cover, and your supplier has 2 weeks of lead time for the product, the ideal stock is calculated with 8 weeks.</span></p><figure class="image image_resized" style="width:66.16%;"><img src="https://www.shelfplanner.com/wp-content/uploads/2024/04/Ideal-Order-1024x542.webp" alt="No more stock-outs with automated inventory management"></figure><p>Our forecasting engine is set up to find the ideal stock value for your products, based on your customer demand and any external factors.&nbsp;</p><p>However, for some products, an accurate sales forecast is hard to be calculated. Luckily, the Shelf Planner engine figures out the behaviour of your products and recommends when to use the Ideal Stock, or when for example to order using other parameters.</p><h2>Minimum vs Ideal Stock</h2><p>When setting parameters for replenishment in retail, 'Weeks of Stock' and 'minimum stock' serve different purposes and are suitable for different scenarios. Here's a detailed comparison of when to use each:</p><h3>When to use Ideal Stock</h3><p>Ideal Stock is calculated using your Sales Forecast, your current and future stock and a number of parameters. In particular the Weeks of Stock parameters is the main driver. Weeks of Stock (sometimes referred to as Weeks of Cover) is a measure that indicates how many weeks the current inventory will last based on the forecasted demand.</p><h4><strong>1. Demand Fluctuation</strong></h4><p>When demand is highly variable or seasonal, 'Weeks of Stock' helps adjust inventory levels dynamically according to expected changes in sales patterns.</p><h4><strong>2. Fast-moving items</strong></h4><p>For items with high turnover rates, using 'Weeks of Stock' ensures that inventory levels are closely aligned with sales, minimising both stock-outs and excess inventory.</p><h4><strong>3. Forecast Accuracy</strong></h4><p>When you have a reliable sales forecast, 'Weeks of Stock' allows you to keep inventory levels appropriate for the expected demand.</p><h4><strong>4. Short Lead-times</strong></h4><p>If the lead time from suppliers is short and consistent, 'Weeks of Stock' can be effective because it allows for frequent adjustments to inventory levels based on recent sales data.</p><h2>When to use Minimum Stock</h2><p>Minimum stock, also known as safety stock or buffer stock, is the lowest quantity of inventory that you aim to have on hand to avoid stockouts during normal demand fluctuations and lead time variability.</p><h4><strong>1. Demand Stability</strong></h4><p>For items with stable and predictable demand, minimum stock levels can be set based on historical sales data and lead times to ensure sufficient inventory.</p><h4><strong>2. Critical Items</strong></h4><p>For critical items that must not run out of stock under any circumstances, setting a minimum stock level ensures there is always a buffer to meet unexpected demand or supply delays.</p><h4><strong>3. Less Frequent Replenishment</strong></h4><p>For items that are replenished less frequently, minimum stock helps ensure that you have enough inventory between replenishment cycles.</p><h4><strong>4. Long Lead-times</strong></h4><p>When lead times from suppliers are long or uncertain, maintaining a minimum stock ensures that you have enough inventory to cover the replenishment period.</p><p>&nbsp;</p><p>&nbsp;</p>

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