Adding Inventory Policies

Inventory policies describe how inventory is managed across facilities in our supply chain. These policies can include how and when to replenish, how stock is picked out of inventory, and many other important rules.

In general, we add inventory policies using the InventoryPolicies table in Cosmic Frog.

(R,Q) inventory policies

An (R,Q) policy is a commonly used inventory management approach. Here, when inventory drops below a value of R units, the policy is to order Q units. In Cosmic Frog, when an (R,Q) policy is selected, we can define R and Q in “SimulationPolicyValue1” and “SimulationPolicyValue2”, respectively. We can define the unit of measure (e.g. pallets, volume, individual units, etc.) for both parameters in their corresponding simulation policy value UOM column.

In the following example, MFG_STL has an (R,Q) inventory policy of (100,1900) for Product_2, measured in terms of individual units (i.e. “each”).

(s,S) inventory policies

(s,S) policies are like (R,Q) policies in that they define when to reorder and how much to reorder. In an(s,S) policy, when inventory is below s units, the policy is to “order up to” S units. In other words, if x is the current inventory level, and x < s, the policy is to order (S-x) units of inventory.

In the example below, DC_VA has an (s,S) inventory policy of (150,750) for Product_1. If inventory dips below 150, the policy is to order so that inventory would replenish to 750 units.

(T,S) inventory policies

A (T,S) inventory policy is like an (s,S) inventory policy in that whenever inventory is replenished, it is replenished up to level S. Under an (s,S) inventory policy, we check the inventory level in each period when making reorder decisions. In contrast, under a (T,S) inventory policy, the current inventory level is only checked every T periods. During one of these checks, if the inventory level is below S, then inventory is replenished up to level S.

In the example below, DC_VA manages Product_1 using a (T,S) inventory policy. The DC checks the inventory level every 5 days. If inventory is below 750 units during any of these checks, inventory is replenished up to 750 units.