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Process documentationBalancing Excess and Shortage

 

The inventory balancing service uses this process to determine which location with excess is to transfer stock to which location with shortage. The inventory balancing service makes decisions about stock transfer within an inventory balancing area, although parent locations cannot transfer stock to their own child locations.

Process

  1. The system looks for the location with the (next) largest excess.

  2. The system looks for the location with the (next) largest shortage.

  3. The system checks whether both locations are in the same inventory balancing area and if the location with the largest shortage is a direct or indirect child location of the location with the largest excess. If neither of these is the case, the system goes back to step 2 and looks for the location with the next largest shortage, and so on. If the system does not find a permissible combination of locations, it goes back to step 1 and looks for the location with the next largest excess to check whether inventory balancing of this location with the location with the largest shortage is possible. This operation is repeated until the system finds a permissible combination of locations. If the inventory balancing service does not find a permissible combination, inventory balancing does not take place.

  4. The system rounds the quantity of stock to be transferred. For more information, see Rounding.

  5. The system then executes a cost-benefit analysis of the potential stock transfer. If the calculated cost is higher than the benefit, the system goes back to step 2, or step 1. This is repeated until the system executes a costs-benefit analysis that results in a higher benefit that cost. If there are no potential stock transfers for which the benefit is higher than the cost, inventory balancing does not take place.

  6. The system generates a recommended stock transport requisition.

  7. The system updates the excess and shortage of the individual locations and begins at step 2, or step 1. It repeats this process until there are no more locations that have an excess or a shortage.

Note Note

You can change the process as follows:

  • The system updates excess and shortage in a reversed sequence, so that it looks for the location with the (next) greatest shortage first.

  • The system considers the priority of inventory balancing areas. The process above is executed for the inventory balancing areas with the highest priority first, it is then repeated for those with the next lowest priority, and so on. This change only has an effect on inventory balancing areas sharing individual locations.

End of the note.

Result

As a result of this process the system generates recommended stock transport requisitions. For more information, see Creating Stock Transport Requisitions.