Inventory Controlling: Parameters Controlling 

What is Parameters Controlling?

You can use the parameters controlling standard analysis to gain a quick an overview of the cause of high stock levels Parameters controlling gives you the opportunity to optimize material parameters on the basis of the statistical data in Inventory Controlling, thus enabling you to optimize stock levels. Graphics help you in the search for those materials with potential for optimization with regard to individual material parameters such as lot size and safety stock. In this way, you can reduce your stock levels in the long term and avoid stock shortfalls.
In a future Release level, parameters controlling will be enhanced to include deviation analyses in which a modification of the parameters can be used.

The parameters controlling standard analysis uses a cause-oriented approach to reaching the goal of inventory optimization, i.e., the reduction of capital lockup. Cause-oriented means you can target specific characteristic values which show weaknesses or certain parameters. This enables a differentiated view. The possible advantages of high stock levels is also taken into account.

Integration in Inventory Controlling

Parameters controlling is implemented in the form of 5 predefined dual classifications.

In these dual classifications, the characteristic values (materials) are classified with regard to two key figures. The segments that are thus created can then be inspected more precisely with regard to the characteristic values they contain. This makes interrelationships between key figures more apparent and allows possible problem areas can be quickly detected.

The dual classifications available in parameters controlling can also be carried out in the standard analyses for stock/requirement, except for the dual classification Slow-moving items.

Parameters controlling is based on data that is updated to information structures S031 and S032.

Updating of the key figures Average stock at receipt and Value of the average stock at receipt in information structure S031 is not continuous and must be activated.
For an Ad hoc analysis, data can be read directly by placing an ‘X’ in the field Dynamic data selection in the standard analysis selection screen.
To initiate the update, start from the Inventory Controlling menu and select: Standard analyses ® Param. controlling ® Set up data. A selection screen appears. Specify the characteristics and the period for which the data is to be updated in S031 and select Program ® Execute. Also read Updating for Standard Analyses: Requirement/Stock and Parameters Controlling

Dual Classifications

The five predefined dual classifications in parameters controlling are described below.

You can find the dual classifications in any initial or drilldown list under the menu option Edit.

You can find information about dual classification in Dual Classification, and information about displaying the results in Displaying the Results.

The five following dual classifications are available

Lot Size

The key figures range of coverage of the average receipt and value of the average receipt are compared.

Background

If a material is ordered or produced in lot sizes that are too large, this leads to an excessive average stock level which incurs unnecessary costs. The lot size must, however, be seen in relation to the consumption. A high level of consumption justifies a large lot size. For this reason, you need a key figure that takes both the lot size and consumption into account: the range of coverage of the average receipt in days. If the range of coverage of the average receipt is large, then the lot size, and thus the average stock can be reduced.

Procedure

If you wish to perform this dual classification, start from an initial or drilldown list and select: Edit ® Check parameters ® Lot size.

Materials which are assigned to the upper class limits with regard to both key figures will be easily visible, i.e. these materials have a high range of coverage of the average receipt and display a high value of the average receipt. This means that a reduction of the lot size is recommended, as the current lot size has a high value at receipt, thus causing a high stock value and a high capital lockup.

Stock at Receipt

The key figures range of coverage of the average stock at receipt and value of the average stock at receipt are compared.

Background

If a receipt of a material takes place when a large quantity of this material is still available in the warehouse, this leads to a disproportionately high average stock, which incurs great costs.

The amount of stock at receipt can only be judged in relation to the consumption. The decisive key figure here is therefore ‘range of coverage of the average stock at receipt’.

An unnecessarily high stock level is the result of premature procurement or production.

You should check for the following in order to find the cause for excessively high stock at receipt:

Procedure

If you want to perform this dual classification, select from an initial or drilldown list Edit ® Check parameters ® Stock at receipt.

Materials which show both a large range of coverage of average stock at receipt and a high value of the average receipt, have high warehouse stocks at receipt, in relation to consumption, and should therefore be examined more closely.

The average stock at receipt cannot be updated automatically at plant level. You can activate the updating of these key figures yourself at regular intervals. You can find the report for setting up the average stock at receipt under Standard analyses ® Param. controlling ® Set up data.

Safety Stock

The key figures value of the average stock at receipt and stock factor are compared.

Background

The key figure stock factor is calculated by dividing the average stock at receipt by safety stock and should ideally be 1.

In order to optimize stock levels, and at the same time observe the safety factor, it is advisable to reduce the average stock at receipt to correspond with the safety stock. The optimum level is reached when the average stock at receipt and the safety stock are equal. If the average stock at receipt is larger than the safety stock, this leads to an unnecessarily high stock level, if it is smaller, then there is a danger of a shortage. If you wish to optimize the average stock at receipt, you should ask the following questions:

In reorder point planning, a purchase order is always triggered when the reorder point has been exceeded. The reorder point consists of the safety stock and the consumption in the delivery time. If the average stock at receipt is always higher then the safety stock, for example, then this might indicate that the delivery times have been incorrectly estimated, orders have been placed prematurely, or that the safety stock level is too high.

Procedure

If you want to perform this dual classification, start from an initial or drilldown list and select Edit ® Check parameters ® Safety stock.

You need to look out for materials that deviate greatly with regard to both key figures and that show a stock factor which is clearly higher than 1.
There is potential for improvement in the consumption forecast or in the delivery time setting.

Safety Stock Buffer

The key figures range of coverage of the average receipt and range of coverage of the average stock at receipt are compared. Both of these key figures represent the safety stock buffer.

Background

Avoiding shortfalls is one of the key aims of inventory management. You can make use of two strategies to achieve this aim:

If you decide on a high safety stock, you should check whether the lot size and thus the average stock at receipt can be reduced.

If you decide on a large lot size, for reasons of cost, then you should consider making a reduction to the safety stock and thus the average stock.

Procedure

If you want to execute this dual classification, start from an initial or drilldown list and select: Edit ® Check parameters ® Safety stock buffer.

You should pay particular attention to characteristic values that are in the upper class limits for both key figures. The combination of a high lot size (represented by the key figure range of coverage of the average receipt) and a high safety stock (range of coverage of the average stock at receipt) indicates that MRP has been conducted incorrectly. If you are aiming for a high lot size, then a small safety stock is sufficient as a rule. If, on the other hand, you are aiming for a high safety stock, the smaller lot sizes are sufficient. Therefore, you are recommended to use one strategy only, i.e. either a high lot size or a high safety stock.

The average stock at receipt cannot be automatically updated at plant level. You can activate the updating of this key figure yourself at regular intervals. You can find the report for setting up the average stock at receipt under Standard analyses ® Param. controlling ® Set up data

Slow-Moving Items

The key figures value of the last consumption and days without consumption are compared.

The key figure ‘days without consumption’ is derived from the time difference between the date of the last consumption and the current date.

Background

Slow-moving items are those materials whose last consumption was a long time ago. Slow-moving items incur costs without being of any use. Identification for these materials helps to cut costs.

Procedure

If you want to perform this dual classification, select from an initial or drilldown list, Edit ® Check parameters ® Slow-moving item.

You need to take action in the case of materials which show high values for both key figures.