Summary
The Class Settings Groups screen is where you configure the settings that you want used for each of the groups of items determined by your Global Class Settings.
It is accessible by clicking Admin--> System Configuration --> Class Groups path.
For recommendations on how you might want to set these values, check the How should I set my ABC Break percentages and criteria mix? topic.
Class Setting Groups Grid
The grid at the top of the screen will show all of the possible settings groups for the class settings you have configured. If you have checked none of the "Class By..." boxes in the Class Settings page, then there will be only one entry - your default settings. The default settings will always exist, and will always have a checked checkbox in the "Settings Exist" column.
If, for example, you have selected to class "By Site", then you will see one row for each site that you have, as well as the "default settings" mentioned above. You can, optionally, click on each of these settings rows to create unique settings for any site for which you want to have unique classing settings. Any groups for which you do not create an override will have the "Settings Exist?" checkbox cleared, and those groups will fall back on the default settings.
ABC Options
The first box with ABC Options has basic configuration information for your classes:
- Num Months of Sales: How far back to look into history when gathering up data for which to do the classing. Typical is 12 months.
- Num Months Forecast: How far to look into the future, via your forecast, when gathering data with which to do the classing. Often this is set to 0, but if you want to try and class proactively, especially if your business is highly seasonal, then you can set this to something like 3-6 months.
- Use N Class: This determines whether items are allowed to be in a special "N" class while they are still new, according to the Inventory Limits settings for the item's new age. This setting is recommended.
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Class Non-Stock Items: This determines whether items that come from your host ERP with a non-stock policy specified, such as "Buy To Order" are included in your classing. When disabled, anything with a non-stock Order Policy is automatically assigned an "X" class. Note that items with an inactive policy, e.g. "Do Not Order" or "Replaced", or "Obsolete" are always X-class. Be aware that if you have an order policy override in place however, this will override a value from the ERP system.
- NOTE: This can have the effect of some items that are new, according to your inventory limits (e.g. Usage Pattern = New) to still be classed as "X", if they have a non-stock order policy assigned to them.
ABC Break Values
The ABC Break Values box allows you to define where the breaks between classes occur. The break is based on the item's "score", which is discussed below.
When assigning classes to items, StockIQ assigns each item within a classing group (such as per-site or per-product category) a score according to the classing criteria that you define (below), and then sorts each item within this group by that score, from high to low. The score is roughly analagous to that item's percentage contribution to the overall total of the measures(s) you have selected by which to do the classing.
StockIQ then keeps a running total of the scores of each item, and when the total running score reaches the next break value, then a next class is assigned.
The default break values in StockIQ Are:
- A = 80%
- B = 95% (e.g. the next 15%)
- C = 99% (e.g. the next 4%)
- And then D items would automatically be the last 1%.
For example, 80% is a common break value for your A items. This means that the items that make up the top 80% of your criteria will be assigned the class "A". This can be 10 items, or it might be 100 items. As a rough ballpark, it is common that around 20% of your SKUs will be responsible for 80% of your business, so it's common to see about that number of A items.
ABC Classing Criteria & Score Assignments
The classing criteria allows you to specify upon what measures you want your inventory scored, and therefore sorted for classing. Pay close attention to this! You can use as many or as few of these criteria as you wish, just make sure your weights add up to 1.0 = 100% when you are done.
Tip: If your business is more customer & service level focused, select measures like Hit Frequency and Quantity Sold to determine classing. If you are more profit or growth focused, choose measures like Revenue or Margin. You can combine these factors by percentages you decide.
The weights for each of your criteria work like this:
StockIQ calculates the sum of each measure, for example, the total hits for all items. Hits are unique appearances of an item on a customer sales order. Note this value is different from Qty Sold. For example, if there is one sales order line of ItemA for qty 100, the Qty Sold would be 100 while the hit would be 1. If there are dependent demand records, each dependent demand is counted as a hit as well. Forecast is not able to contribute to hits totals.
Each item then is given a score, which is its percentage contribution to the overall total. For example, if there are a total of 1000 hits, and an item has 10 hits, then its score is:
10/1000 = 0.01Or, using Revenue, if the total revenue is $500,000 and an item has $20K in Revenue, its score is:
$20K/500K = 0.04When multiple criteria are specified, such as Hits and Revenue, the scores are prorated by the percentage weight you have assigned to each criteria. So, if you were using 75% hits, and 25% revenue as in the example above, the item's score would be:
.01 * .75 + .04 * .25 = .0175Service Level Targets
Once an item is assigned to a class, then the next thing StockIQ will do is assign an associated service level target for that item. In StockIQ, there are two ways that StockIQ can assign the service level target. The first is by class, where each class can be assigned a service level target, such as:
- A = 99%
- B = 98%
- C = 95%
- D = 90%
- N = 98%
- X = 50%
NOTE: Service level of 50% equates to zero safety stock
The second method is a margin-optimized calculation that trades off the amount you make on the item versus the holding cost, with some coefficients for customer goodwill/stockout frequency in place. You can compare the Class-Based Service Level Target and the Margin-Optimized service level target for all items in the Safety Stock Summary screen.
NOTE: Margin-Optimized service-level targets can only be calculated for items with recurring usage pattern. All others will use the class-based service level target assignments as a fallback.
The resulting target service level factors directly into your safety stock calculation, and sets inventory levels for your replenishment suggestions.
IMPORTANT: There is no such thing as a service level target of 100%, since it is mathematically not allowed. You can use 99.9999%.