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  Decision Between Normal and Poisson Distribution

Use

As a basis for the combined calculation of economic order quantity (EOQ) and safety stock (SFT) the system chooses whether to use normal distribution or Poisson distribution as the calculation model for each location product depending on its sales behaviour. Normal distribution is suitable for products with constant demand and Poisson distribution is suitable for products with intermittent demand.

For normal distribution, the system uses the forecast values for demand in pieces as the basis for the combined calculation of EOQ and SFT.For Poisson distribution, the system uses the forecast values for the number of order items as the basis, and then calculates the demand in pieces using the average demand size per order item.

Features

The system’s decision whether to use normal or Poisson distribution for a location product is based on the following factors:

  • Product group assignment

  • Forecasted order items per month

  • Forecast model

Depending on these factors, you can define rules according to which the system makes the decision on the SAP Easy Access menu under Start of the navigation path Advanced Planning and Optimization Next navigation step Service Parts Planning (SPP) Next navigation step Planning Next navigation step Inventory Planning Next navigation step EOQ and Safety Stock Next navigation step EOQ/SFT Model Determination Rules. End of the navigation path

  • In the Number column, you enter the sequence according to which the system is to consider the rules defined by you.

  • In the Min. No. Order Items (Month) >= column, you enter the forecasted lower limit of order items per month of location products for which you want these rules to be valid.

  • In the Product Group Combination column, you enter the product group ID to which the location products belong that you want these rules to be valid for.

    In the navigation tree on the left under Products Group Combination (Model Determination) you can create product group combination by assigning them a version, a name, and a description.

    You can assign product group types and product groups to the defined product group combinations under Product Group Entries (Model Determination) . The system only chooses products for which all entries apply (product group types and product groups are AND links).

  • Under Fcst Type , you specify the forecast model type to which the location products to belong that you want these rule to be valid for.

  • Under Model , you choose whether you want to plan the stock of a location product that has the characteristics defined by you, using normal or Poisson distribution.

On the EOQ/SFT Model Determination Rules screen in the navigation tree on the left you can also assign the model, which you want to use, to location products independent of the defined rules.

You can see which model the system has chosen for a specific location product in the location product master data on the SPP Inventory Planning tab page in the EOQ/SFT Calculation field. In this field, you can also overwrite this decision manually. The system considers your manual entry until the next planning run.

For more information about the calculation of EOQ and SFT, see Calculation of EOQ and SFT Using Normal Distribution and Calculation of EOQ and SFT using Poisson Distribution .