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Service Level Optimization

Updated

Summary

The Service Level Optimization screen provides the ability to run optimization simulations for service levels on-demand. This shows the impact of different inventory budgets on possible stockout counts and service levels.

When the screen is loaded, you will see the most recently run optimization, if enabled in the Global Service Level Settings screen.

Generally, to use this screen you will:

  1. Click the Edit menu
  2. Click the "Configure Site Budgets" option to set your budgets in the Service Level Optimization Budgets Dialog
  3. Click the Display button to set your Service Level Optimization Options
  4. Click Edit --> Simulate
  5. View the results in the grid
    1. If you like the results, you can select Edit --> Save Simulation results
    2. If you like the new budget, you can select Edit --> Save Configured Budgets

Column Description

  • Item - the Item being evaluated.
  • Site - the site at which the item being evaluated resides.
  • ABC - the ABC classification for this Item-Site.
  • XYZ - the XYZ classification for this Item-Site.
  • Order Policy - the active order policy for this Item. 
  • SIQ Order Policy - the StockIQ calculated order policy; this may be different from the active order policy if you have an override in place or are passing order policies into StockIQ from your ERP.
  • Annualized Hits - the annualized expected number of hits, based on your classing criteria.
  • Annualized Margin - expected annualized margin, based on the quantity sold from your hits, and then using StandardCost and StandardPrice for the Item-Site.
  • Standard Cost - the item-site's standard cost.
  • Baseline
    • Tgt Sl % - the item-site's current target service level.
    • Active SS Exp SL % - the item-site's expected service level based on the active safety stock value.
    • Safety Stock - the item-site's current safety stock.
    • SS $ - the item-site's safety stock valued by the standard cost.
    • Stat SS - the StockIQ calculated statistical standard safety stock.
    • Std SS $ - the standard safety stock valued by the standard cost.
    • Est. Annual Stockouts - an estimate of expected number of stockouts per year, based on the hits and the service level percentage. 
    • Est. Lost Margin - estimated lost margin per year on this item, based on the annualized margin and service level percent.
    • Class Based Tgt SL - the service level percent that would be assigned to the item if doing class assignments by ABC.
    • SS Override? - if checked, there is a safety stock override in place for this item-site. 
    • SL Override? - if checked, there is a service level override in place for this item-site. 
  • Margin Optimized
    • Margin-Optimized SL % - the service level percent that would be assigned to the item if using the margin-optimized SL option.
    • Margin-Optimized SS - the margin-optimized safety stock, in units.
    • Margin-Optimized SS $ - the safety stock valued by the standard cost.
  • Previous/Saved Optimizations
    • Site-Optimized SL % - the service level percent assigned to this item during the last run/saved optimization; this will be blank if the automated optimization is not enabled in the Global Service Level Settings.
    • Site-Optimized SS - the service safety stock assigned to this item during the last run/saved optimization.  Blank if the automated optimization is not enabled in the Global Service Level Settings.
    • Site-Optimized SS $ - the safety stock value assigned to this item during the last run/saved optimization.  Blank if the automated optimization is not enabled in the Global Service Level Settings.
    • Site-Optimized Stockouts - expected number of stockouts per year for this item based on the last run/saved optimization.  Blank if the automated optimization is not enabled in the Global Service Level Settings.
    • Site-Optimized Lost Margin - expected lost margin per year due to stockouts for this item based on the last run/saved optimization.  Blank if the automated optimization is not enabled in the Global Service Level Settings.
  • Simulation Values
    • Simulation Tgt SL % - the service level percent assigned to this item during the last simulation.
    • Simulation SS - safety stock assigned to this item as a result of that service level % during the last simulation.
    • Simulation SS $ - the inventory value associated with that safety stock during the last simulation.
    • New Est. Annual Stockouts - new estimated annual stockouts based on the latest simulation.
    • New Est. Lost Margin - new estimated lost margin per year based on the latest simulation.
    • Start vs. Sim SL % - the percent change in service level target from current to the most recent simulation, for easy comparison.
    • Start vs. Sim - the change in safety stock from current to the most recent simulation, for easy comparison.
    • Start vs. Sim $ - the change in safety stock value from current to most recent simulation, for easy comparison.
  • Next SS Increase
    • New Est Stockouts
    • Stockout / $ Change
    • New SL Target
  • Next SS Decrease
    • New Est Stockouts
    • Stockout / $ Change
    • New SL Target

TIP: Filter your simulation results to only rows where the Stat vs Sim columns are nonzero, to highlight the changes made by the algorithm.

Context Menu

When you right-click on a row in the grid view, will have the following options:

  • Inventory Snapshot - provides item-site attribute information.
  • Forecast Chart - a visual of the item-site forecast, this is the same as what you would see in the Forecast Manager.
  • Sawtooth Chart - the sawtooth diagram for this item-site.
  • Item-Site Notes - allows you to view or add an item-site note that are on this item.

Display Options

  • Optimization Starting Point - determines if the optimization should begin from StockIQ's pure "Statistical" safety stock to give you sort of a best-case scenario, or if it should start from your current active safety stock levels, which includes the effects of any overrides that you have present, or any ERP safety stocks that are being used.
  • Optimization Strategy - this tells StockIQ what to optimize:
    • Stockout Reduction - should we target the lowest possible stockouts for a given inventory budget?
    • Margin Loss Reduction - should we target the lowest possible loss of margin for a given inventory investment?
    • Customer Satisfaction Weighted Margin Loss Reduction - This is a variant of the margin-loss reduction method that assigns a weight to each stockout to represent the loss in customer satisfaction each time they experience a stockout. You can choose the weighting on the factor as to how important you consider this, to set your balance between loss of margin and stockouts, and the effect on your customer happiness and loyalty.
  • Site - this tells StockIQ to run the optimization against a specific site or sites.
  • Optimize items with SS overrides - this tells StockIQ to run the optimization on item-site's with a safety stock override in place.
  • Optimize items with SL overrides - this tells StockIQ to run the optimization on the item-site's with a service level override in place.
  • Include Buy to Order items in Optimization - this tells StockIQ to run the optimization against Buy to Order items.

Troubleshooting

There are a few reasons you may not see an item-site included in the optimization: 

  • Non-stock items - if an item-site has a non-stock order policy, we will not plan to optimize the service level since it will never be planned to keep in stock.
  • Items without a cost - if an item has no cost associated, there is no way to determine a tradeoff for it's holding cost, so these are ignored.
  • New Items - new items are not optimized.
  • Items with SS overrides - by default, items with Safety Stock Overrides are not included in the optimization, although you can enable this in the Display Options.
  • Items with SL Overrides - by default, items with Service Level Overrides are not included in the optimization, on the reasoning that you've already provided the explicit SL required for this item-site. This can be enabled in the Display Options.
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