Adjusting stock-on-hand data
4.5 Determining When to Place an Order or Issue
Te diference between the three inventory control systems is the trigger for placing an order or issuing resupply. Tis section reviews the rules for the three types of max-min inventory control system: forced-ordering, continuous review, and standard.
Forced-ordering max-min system
Even though this max-min inventory control system is called forced-ordering, this type of max-min system can be used in either a pull (requisition) or a push (allocation) system. In either a system, the forced-ordering max-min system action is done at the end of each and every review period—either a requisition is made by the facility, or a facility sends a report with data to help their supply source determine how much to allocate to that facility.
Storekeeper.decision.rule.
In a forced-ordering system, the facility is resupplied based on the following decision rule:
Forced-ordering.max-min.system.storekeeper.decision.rule
At the end of each review period, review all stock levels and order or issue enough stock to bring the levels up to the max.
Place an emergency order if the stock level for any item falls below the emergency order point before the end of the review period.
In a forced-ordering max-min system, storekeepers do not use the min, because they always take action at the end of the review period. Te review period, then, is the trigger for ordering.
Storekeepers must be careful not to run out of stock. Terefore, in addition to applying the decision rule for ordering, they are given an EOP. Storekeepers will know that they have reached the EOP if they frequently assess stock. Tis is why, in systems that place orders quarterly, stock status should be assessed more frequently. Te results of a stock status assessment alert the storekeeper to the need to place an emergency order for any item that has reached the EOP.
Advantages.and.disadvantages.of.forced-ordering.max-min.system A forced-ordering system has both advantages and disadvantages:
• Te storekeeper’s decision rule is simple: order/issue every item at the end of the period.
• Because orders are placed at regular intervals (i.e., the end of each review period), transportation can be scheduled for specifc times, making it easier to ensure the availability of transport resources.
• Every facility orders or is resupplied at the end of every review period.
• Because all items are ordered/issued at the end of every review period, storekeepers do not need to constantly assess stock status, unless they think a potential stockout is possible.
• One disadvantage of a forced-ordering system is that orders for some items may be for small quantities; because all items are ordered, regardless of the stock on hand.
Forced-ordering.max-min.system.in.Nepal.
In 2002, Nepal’s Ministry of Health decided to integrate the logistics system for more than 200 health products. This meant that different types of products would be ordered on the same order form and delivered at the same time.
In designing an appropriate max-min inventory system for the integrated logistics system, the MOH considered the reality of distribution in Nepal. because some facilities are extremely diffcult to reach (some require walking for 14 days), unpredictable timing of orders, as required by a continuous system, was not practical. Thus, the MOH chose a forced-ordering system with a quarterly review period. Under this system, facilities must order up to their max every quarter, but emergency ordering is possible if the stock level falls below the emergency order point at any time.
because of the reduction in delivery frequency, lower levels needed to hold more stock on hand. To address this change in storage space requirements, the MOH is rebuilding the country’s 75 district stores.
Forced-ordering.variation:.delivery.truck.system
One variation of a forced-ordering max-min system is the delivery truck system, sometimes called a topping up or bread truck system. It can also be called Vendor Managed Inventory (VMI) system. Te rules for the storekeeper and the considerations for the designer are the same as for a regular forced-ordering system.
Te diference between a regular forced-ordering system and a delivery truck system is the way the deliveries are made. In a delivery truck system, a truck is loaded with supplies at the end of the review period. Te truck and a delivery team travel to each facility, assess the stock, and leave (top up) an amount of each product that is sufcient to bring stock levels up to the max at that location.
Delivery.Truck.Topping.Up.(DTTU).in.Zimbabwe
The Zimbabwe National family Planning Council uses a DTTU system to supply health facilities with condoms, contraceptives, nevirapine, and HIV rapid test kits.
Under this forced-ordering delivery truck inventory control system, facilities do not place orders. Instead, delivery trucks, pre-loaded with estimated product
requirements, visit 1,400 facilities quarterly to do stock accounting and reporting tasks, as well as to top up facilities to their max level. The DTTU system in Zimbabwe has signifcantly increased the availability of products at facilities; it has improved reporting rates while reducing the reporting burden on health workers.
Delivery truck systems can be either pull or push systems. In the former, the truck arrives, and the storekeeper completes the report/transaction record and orders from the truck. In the latter, the supervisor on the truck calculates the quantity to be issued and issues it from the truck. Te supervisor may or may not complete the facility’s report. In some cases, the supervisor and storekeeper complete the order form together. Te diference for the designer is determining who should be trained to complete the order form—multiple storekeepers or just a few supervisors/delivery team members.
Advantages.and.disadvantages.of.the.forced-ordering.delivery.truck.system Te delivery truck system has several advantages over regular forced-ordering:
• Te order is flled on the spot, so the facility does not have to hold quantities of stock while waiting for the next delivery. Te lead time is zero, which lowers the lead time stock to zero. Tis lowers the min and, consequently, the max stock levels.
• Damaged or expired products can be put back on the truck for disposal (if this is the procedure for handling these products), taking advantage of space on the truck.
• Te truck can be sent out with a full load of supplies, eliminating multiple small orders.
• Te LMIS report can be completed and collected at the time of delivery. Tis is especially advantageous when reporting is delayed because of poor mail service, or when reporting is spotty because facilities lack postage funds.
• Te training requirements are signifcantly less; only delivery team leaders need training, rather than all the facility staf.
• If a supervisor goes on the truck for deliveries, he or she can provide on-the-job training and supervision at the various stops. Tis is helpful when transport for supervision alone is difcult and higher-level managers want to ensure routine supervision.
Te delivery truck system can also have certain disadvantages:
• All types of max-min systems rely on their delivery trucks. However, the delivery truck system is particularly vulnerable to breakdowns. If the truck breaks down, the whole system breaks down.
Alternate transport for emergency orders must be available.
• A sufcient number of staf must be available in the ofce to complete logistics management and other duties while team leaders are away making deliveries.
• Te system may require larger trucks, as trucks always carry more stock then they will actually deliver.
Automating.data.collection.in.delivery.truck.systems
Delivery truck forced-ordering systems can relatively easily accommodate technology that can help improve the speed and accuracy of stock calculations. Instead of using a piece of paper, pencil, and calculators, delivery team leaders travel with laptops, cell phones, or other handheld devices where they enter stock-on-hand data and
max stock quantities, and reorder the calculated quantities. Automating data collection on the delivery truck also greatly facilitates the data entry process at the central level. Data can be transferred directly to a database to produce national level stock status reports.