Summary
Site-Level service-level optimization is the process of optimizing your product mix based on a criterion you choose, usually one of:
- Minimize stockouts
- Minimize lost margin due to stockouts
- Minimize a customer-satisfaction-weighted lost margin (e.g. stockout frequency vs lost margin)
The starting point for the optimization is your current safety stock levels, as well as a budget for any sites for which you want to do the optimization, configured through the Service Level Optimization Budgets Dialog.
You can configure these options through either the Global Service Level Settings screen to be used on an ongoing basis, and these same options are available for simulation in the Service Level Optimization screen.
You can run this optimization on-demand through the Site Level Service Level Optimization screen, or on an interval you configure here in the Global Service Level Settings screen.
Column Description
- Enable Site-Level Service Level Optimization - this box is the master control on whether any site-level optimization logic is run by StockIQ on an ongoing basis. When disabled, no automatic updates to your site-level service level optimizations will be run, although you can still do them on-demand in the Service Level Optimization screen.
- 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 - 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.
- Customer Satisfaction Factor - typically somewhere in the range of 0 to 1000, this sets the emphasis on the importance of being in-stock for your customers, when using the Customer-Satisfaction-Weighted method. A value of zero becomes equal to the Margin-Loss-Reduction method. Any nonzero value is a per-stockout dollar estimate of the customer anger and resulting market loss from each stockout, e.g. $100/stockout, $500/stockout, etc. The higher the number, the more emphasis is placed on the effect of the stockout versus the lost margin.
- Include Items with SS Overrides - states whether or not StockIQ can or should modify the service level of items with Safety Stock Overrides during the optimization, or if it should treat those as fixed, and optimize other items.
- Include Items with SL Overrides - states whether or not StockIQ can or should modify the service level of items with Service Level Overrides during the optimization, or if it should treat those as fixed, and optimize other items.