I. Enable Feature
Enable 'Advanced Inventory Management' feature first via Setup > Company > Enable Features.
Under Items & Inventory tab> tick box for: Advanced Inventory Management
On the Inventory Management Preferences page, set up the defaults and intervals that your account uses to make inventory management calculations.
Note: These preference settings apply to the Advanced Inventory Management feature and the Demand Planning feature.
II. Set up Inventory Management:
Go to Setup > Accounting > Preferences > Inventory Management Preferences.
Enter information for each field described below as necessary.
If you enable auto-calculated inventory management for an item and then disable it, the settings return to the last manually entered value.
III. Inventory Management Settings / Descriptions
Use Lead Time and Safety Stock per Location - Check this box to set lead time and safety stock levels for an item at each location. Default value = ‘F’.
Default Lead Time – Enter the default number of days it takes to receive an item after placing an order. Default value = 14 days.
NetSuite uses this number of days lead time when auto-calculating the reorder point of an item. This is true if no lead time is specified in the item record.
If you track multiple vendors per item, NetSuite aggregates lead time calculations across all vendors per item, not per-vendor per-item.
Default Safety Stock – Enter the default number of days to keep an item on-hand based on the daily demand as a buffer to avoid stockouts. Default value = 7 days.
When you use Demand Planning, the safety stock amount for an item is considered when making demand plan calculations.
When you use Advanced Inventory Management, this amount is used to auto-calculate the reorder point of an item.
When the safety stock is entered in days, the safety stock level is calculated as:
(daily demand * safety stock level in days)
For example, daily demand for item #12345 is five per day. You want to keep on hand the Preferred Stock Level quantity plus 3 days worth of buffer stock. You would enter 3 in the Days field next to Safety Stock Level. Replenishment orders are calculated to keep a minimum of three days worth of stock on hand as a buffer. Three days * 5 items daily = 15 items. Then, on the Order Items page, you should order a quantity to keep a minimum of fifteen extra of item #12345 on hand.
This number of days safety stock is also used when auto-calculating the suggested reorder quantity of an item. This is true if no safety stock is specified in the item record.
Default Preferred Stock Level – Enter the default preferred number of days to keep an item on-hand. This variable is a balance between being understocked and potentially delaying fulfillment and being overstocked and inefficient. Default value = 30 days.
The amount you enter determines the preferred stock level that defaults on new item records.
When you use Demand Planning, the preferred stock level field is greyed out on item records that use the Time Phased replenishment method.
When you use Advanced Inventory Management, the preferred stock level you set is used to calculate the quantity of items to be ordered. (Order Items page)
You must enter the default preferred stock level in days, not units. This is a measure of how many days worth of stock you want when the order is received. The preferred stock level is calculated as:
(daily demand * preferred stock level in days)
For example, the daily demand for item #12345 is five per day. You prefer to keep seven days worth on hand in stock. You enter 7 in the Days field next to Default Preferred Stock Level. Replenishment orders are calculated to stock a minimum of seven days worth of an item. (5 widgets daily * 7 days = 35 widgets.) Then, on the Order Items page, you should order a quantity to keep a minimum of 35 widgets in stock.
This number of days supply is used when auto-calculating the preferred stock level of an item. This is true if no preferred stock level is specified in the item record.
Order Analysis Interval – Enter the number of months of history to consider when calculating AIM values. Default value = 6 months.
When you use Demand Planning, the order analysis interval field is greyed out on item records that use the Time Phased replenishment method.
The order analysis interval is used when the seasonal demand for an item is not set.
For example, if you enter 6, the past 6 months of sales order history is evaluated.
Note: If auto-calculation is not functioning as expected, you may need to adjust your Order Analysis Interval setting.
For example, an inventory item was sold only one time since 2007, and the last sale was on 12/1/07. If the Order Analysis Interval setting is 30 days, it cannot be calculated. The Order Analysis Interval setting looks back only one month and does not see the old sale. You would need to modify the analysis interval to include the date of the last sales order to calculate properly.
The historical analysis considers only transactions created after the Multi-Location Inventory feature has been enabled. If the Order Analysis Interval setting includes transactions dated prior to using the Multi-Location Inventory feature, NetSuite cannot complete calculations.
Seasonal Analysis Interval – Enter the number of months to consider as a season. This preferences is applicable only when you use Seasonal Demand on an item, which is useful when you expect seasonal fluctuations in demand. Default value = 1 month.
When you use Demand Planning, the seasonal analysis interval is applicable only to items not set to use the Time Phased replenishment method.
Estimated Demand Change – Enter the default percentage of expected change in demand. Default value = 0%.
For example, demand is projected at 100 units for this upcoming July based on sales last July. But you know that sales for this item have been trending upwards the last two months, and want calculations to mirror this trend. You can enter a percentage to bump up expected demand beyond the calculated amount. If you expect an increase in sales of this item, you can enter a 10% expected demand change added on to previous sales totals.
The amount you enter shows by default on new item records you enter.
For items that use Advanced Inventory Management to calculate demand, the amount is used for calculating the suggested reorder quantity for items. This is true if no demand change percentage is specified in an item record.
When you use Demand Planning, this setting is used only when the forecast method for a plan is set to Seasonal Average.
The expected demand change for the original item is used when a demand plan is created using an alternate source item.
Transactions to Consider – Determine which transactions are used to calculate inventory demand:
Click Orders to include Sales Orders and Work Orders in AIM calculations. The following are not included: Planned Work Orders, Pending Approval Sales Orders, Cancelled Sales Orders, and Cancelled Work Orders. A ‘Closed’ status is included. Special Order Sales Orders and Work Orders are included, but Drop Ship Sales Orders are not because Drop Ship is not received into inventory.
Click Actual Sales to use cash sales, invoices, and assembly builds to calculate demand for setting reorder points and preferred stock levels. Then, sales orders and work orders are not used to calculate demand. Only the cash sales and invoices that bill them and builds that create them are included in demand calculations. Assembly builds are also considered if the Assemblies feature is enabled.
If you use the Cross–Subsidiary Fulfillment feature, for Sales Orders, NetSuite respects the line-level inventory location field, not the location field. This behavior is relevant only when this preference is set to Orders.
If this preference is set to Actual Sales, AIM considers Invoice, Cash Sale, Build, Work Order Issue, and Work Order Completion transactions. There are no transaction status restrictions in this case.
With either option, if you use Work-In-Process (WIP), WIP and Scrap lines for Work Orders are excluded to avoid over-counting quantities on work orders.
Inventory demand calculations consider only transactions that decrease an item's stock level. For example, an assembly build increases the stock level for the assembly item and decreases the stock level for the assembly item's components. In this case, the demand plan calculation considers the assembly build only for the assembly item's components and not for the assembly item.
This preference setting applies to items that use Demand Planning, as well as items that use Advanced Inventory Management to calculate demand.
Note: If you use both sales orders and standalone cash sales/invoices, you should choose the Actual Sales option.
Day of Week To Perform Calculation – Select the day of the week you prefer to run inventory metrics calculations. You can change this selection later, if needed. Default values are Sunday at midnight.This option sets the schedule in which AIM calculations are run on a weekly basis. You should set this preference to fit with off-peak business days. You can initiate a calculation at any time from the preferences page. Click Save, and then Submit & Calculate.
Note: This preference applies only to items that use Advanced Inventory Management to calculate demand.
To perform a one-time inventory metrics calculation, from Save , click Submit and Calculate. NetSuite performs the calculation the night you select it, and occurs in addition to the regular weekly calculation.
For example, you set Monday as the day of the week you want the auto-calculation to run. Choose the Orders for the Transactions to Consider to calculate demand. Then, set an Order Analysis Interval of 6 for the time frame of transactions included in the auto-calculation.
From these settings, NetSuite calculates an average unit sold per day for items that have been set for auto-calculation. This average unit sold per day number is multiplied by the days settings. This setting is on the item record, or in inventory management preferences.
( X days * Y average units sold per day = Z quantity required.)
Note: When you use the Multi-Location Inventory feature, item demand is calculated per location.
IV. Set Item Records to Auto-Calculate at Setup > Mass Updates > Mass Updates.
Time of Day to Perform Calculation – Select a time of day for inventory management calculations to run. Default values are Sunday at midnight.
This option sets the time in which AIM calculations run. You should set this preference to fit with off-peak business hours. You can initiate a calculation at any time from the preferences page. Click Save, and then Submit & Calculate.
Demand Time Fence – Enter a number of days between zero and 365. This number is used as the default demand time fence and shows in the Demand Time Fence field on item records you create. You can change this default number, if necessary, when you create each item record. This field defaults to zero.
Planning Time Fence – Enter a number of days between zero and 365. This number is used as the default demand time fence and shows in the Planning Time Fence field on item records you create. You can change this default number, if necessary, when you create each item record. This field defaults to zero.
If the item record does not identify a planning time fence, NetSuite uses the default planning time fence value identified in inventory preference settings. For details on this preference, read Time Fence Preferences. If the Planning Time Fence field is blank on the item record and the Inventory Management Preferences page, no planning time fence is used.
Auto-calculation and Insufficient Data
In some cases, for items that use Advanced Inventory Management to calculate demand, auto-calculated inventory metrics may not be accurate. This is true if the sample of data does not match the analysis interval. For example, this could occur in the following cases:
Your account is new and you have no sales history data entered.
You have new item records that have no sales history data.
You enabled Multi-Location inventory and have no sales history data per location.
In such cases, the auto-calculation uses the full interval only if there are sales for the item before the beginning of the interval. If there are no sales before the beginning of the interval, the auto-calculation is attempted using half of the interval. If there is not enough data to make calculations using the half-interval, the reorder point and preferred stock level remain unchanged. Then, you can enter manual metrics, or the auto-calculations occur at a later date when there is enough sales data.