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1989-01-20
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INVENTORY MASTER
User's Guide
Version 1.0 SW
(C) Copyright 1988, 1989
by Blair D. Peery
All Rights Reserved
PEERY DATA
P.O. Box 12235
Charlotte, NC 28220
INVENTORY MASTER is not a public domain program, nor is it free.
It is (C) Copyright 1988, 1989 by Blair Peery and Peery Data.
Non-registered users are granted a limited license to use
INVENTORY MASTER for a trial period to see if the program is of
interest. Continued use beyond a reasonable trial period
requires Registration. Information on registering appears on
page 24, followed by an order form.
You may make distribution copies of INVENTORY MASTER for others
to use for a trial period, provided that all documentation is
included. Tell those receiving a copy that it is a shareware
product, not free or public domain.
C O N T E N T S
Introduction and System Requirements................... 1
What can INVENTORY MASTER do?
Overview of the Economic Order Quantity................ 2
What is EOQ, and how can it benefit my
company?
- The Concept.................................. 2
- Real World Complications..................... 4
Installation........................................... 5
How can I set up INVENTORY MASTER on my
computer?
- Using a Hard Disk............................ 5
- Using Two Floppy Drives...................... 6
Tutorial............................................... 7
How do I run the program?
- Step 1: Starting INVENTORY MASTER........... 7
- Step 2: Identifying Your Company............ 7
- Step 3: Using The Menus..................... 10
- Step 4: Describing The Vendors.............. 11
- Step 5: Entering Stock Data................. 14
- Step 6: Printing The Report................. 17
Glossary / Index....................................... 20
Would you mind going over the terms for
me again?
Technical Stuff........................................ 23
What files does INVENTORY MASTER use?
Warranties............................................. 23
What is the limit of liability?
Registration........................................... 24
How can I register my copy and receive a
printed manual, update notices, new product
information, and more?
Order Form............................................. 25
INVENTORY MASTER USER'S GUIDE-------------------------------- 1
I N T R O D U C T I O N
Welcome to Version 1.0 SW of INVENTORY MASTER!
INVENTORY MASTER is a sophisticated program designed to
reduce the cost of purchasing inventory. The powerful EOQ
(Economic Order Quantity) concept is the engine that drives
INVENTORY MASTER: it's the most advanced scientific method
available for controlling warehouse expense. But don't worry --
throughout this program we've balanced the power of academic
theory with a healthy dose of user friendliness. You won't need
an M.B.A. to start enjoying a stronger bottom line now.
The program's centerpiece is the "Inventory Order Report",
containing restocking instructions on ALL of your company's in-
stock inventory items. For each item, the report tells you:
* HOW MANY to buy, and
* WHEN to buy it!
What could be easier? The format of the report makes it easy to
maintain an existing Max/Min system or to start a new one.
Different vendors with different discount schedules are no
problem. We'll even remember which vendors give what discounts.
You only enter it one time, and then forget about it. The next
time you power up the information will still be there.
S Y S T E M R E Q U I R E M E N T S
INVENTORY MASTER requires the following hardware to run:
a computer -- IBM PC, XT, AT or compatible;
a monitor -- monochrome, CGA color, or EGA color;
internal memory -- 256 KB of RAM;
disk drives -- at least one 5.25" or 3.5" drive;
hard disk -- optional, but recommended;
printer -- 80 column printer.
DOS -- 2.1 or later version
INVENTORY MASTER USER'S GUIDE-------------------------------- 2
O V E R V I E W
O F T H E
E C O N O M I C O R D E R Q U A N T I T Y
The EOQ was not widely used originally because it was very
calculation-intensive. Before the age of computers, it wasn't
practical to hand calculate all of the derivatives required for
each part number. Today, when virtually every business has a
personal computer in its office, the age of the EOQ has arrived.
The Concept
-----------
The larger the order a firm places to stock an item, the
greater the cost to the firm of holding the resulting larger
inventory. Expenses associated with holding stock include cost
of capital, insurance, inventory taxes, warehouse rental, and
others. Inventory Holding Cost can be reduced by making smaller
orders more frequently, because the average inventory amount will
be smaller.
However, there is a cost associated with the act of placing
any order, and as the frequency of ordering increases that
Ordering Cost (for the year) will increase. These two basic
costs vary inversely with each other. Of vital importance to the
competitive firm is the minimization of the TOTAL Cost: Ordering
and Holding Costs combined, as shown in Figure 1. The EOQ is the
mathematical quantity that balances the two components, yielding
the lowest Total Cost.
< FIGURE 1 >
| TC
| \ Total
| \ __ Cost
D | -_ ____----
O | OC -_ ____----
L | \ --__ ____---- Holding
L | \ --*----- ___-- Cost
A | \ : ___--
R | \ : ___--
S | `. : ___--
| `. : ___--
| `._ : ___--
| __-*-_
| ___-- : ----____ Ordering
| HC--- : -------_____________ Cost
+--------------:------------------------------------------
EOQ
O R D E R S I Z E
INVENTORY MASTER USER'S GUIDE-------------------------------- 3
As an example, consider NDC, a distributor of valves. They
order from a manufacturer and store the stock in inventory,
attempting to anticipate customer demand for the coming year.
For Valve X, listing at $5.00 each, they expect to sell a
quantity of 1,000. It costs NDC $3.00 every time they place an
order for Valve X, and they estimate their inventory Holding Cost
at 10% of the average dollar value in inventory. (Average
inventory is one half of the order quantity, multiplied by the
$5.00 cost per item.)
Table 1 shows several ordering possibilities for Valve X.
The simplest method is to purchase an entire year's supply with
one order. The average inventory for the year would be $2,500,
since there would be $5,000 worth at January 1st (1,000 pieces @
$5.00) which in theory would decline steadily as sales were made
to $0 by December 31st.
< TABLE 1 >
Part Number: Valve X
Projected Sales: 1,000 units
List Price: $5.00
Ordering Cost: $3.00
Holding Cost: 10.0 %
Order Average Holding Orders Ordering Total
Quantity Inventory Cost per Year Cost Cost
-------- --------- ------- -------- ------- -------
1,000 $2,500 $250.00 1 $3.00 $253.00
500 1,250 125.00 2 6.00 131.00
250 625 62.50 4 12.00 74.50
150 375 37.50 7 21.00 58.50 *
50 125 12.50 20 60.00 61.50
25 63 6.30 40 120.00 126.30
1 3 .30 1,000 3,000.00 3,000.30
From the average inventory, the holding 10% is applied to
arrive at the Holding Cost of $250.00. With only one order per
year, the Ordering Cost is $3.00, giving a Total Cost of $253.00.
Obviously, this method is not the best. If 500 Valve X's were
ordered twice a year, then the Holding Cost savings of $125.00
more than offsets the increase in Ordering cost of $3.00. The
Total Cost drops from $253.00 to $131.00. As the order quantity
continues to be lowered, the example is reached of ordering one
Valve X at a time 1,000 times a year. Table 1 shows that the
Total Cost has risen to an unacceptable $3,000.30.
INVENTORY MASTER USER'S GUIDE-------------------------------- 4
Somewhere between the extreme order quantities of 1,000 at a
time and one at a time lies the Economic Order Quantity. An
order quantity of 150 on Table 1 corresponds to a $58.50 Total
Cost, the lowest of our guesses. It is marked with an asterisk.
However, running the EOQ calculation on this problem gives an
order quantity of 110, which is the lowest POSSIBLE solution:
the Total Cost becomes $54.50.
Real World Complications
------------------------
EOQ yields the biggest savings, and is much faster than
setting up a trial-and-error table. Unfortunately, in most real
life situations purchasing is complicated by quantity discounts
offered by the manufacturer. In that case, EOQ's must be
calculated using each new discounted price, and compared to the
EOQ's found at the standard price.
But who's going to be performing all this math? Using a
personal computer to do the work cuts the time and eliminates the
numerical errors inherent in the "paper and pencil" approach.
With INVENTORY MASTER, EOQ's are calculated for every part you
enter, for every discount possible, and you end up with the
discount which is the most advantageous. All results are
compiled in a handy Inventory Order Report.
If you save only $10.00 per inventory item in your
purchasing decisions, and you stock 500 different items, then
you'll save $5,000.00 in the first year alone. INVENTORY MASTER
should recover its own registration fee within the first month --
how's that for an aggressive payback period?
INVENTORY MASTER USER'S GUIDE-------------------------------- 5
I N S T A L L A T I O N
After INVENTORY MASTER is installed you can experiment with
the program. It's meant to be self-explanatory, but to avoid
confusion you may wish to read through the Tutorial. It will
guide you step by step as a fictitious company (much like yours)
gets INVENTORY MASTER up and running.
If you have a hard disk, read section one below and then go
on to the Tutorial. If you don't have a hard disk, skip down to
section two now.
1. Using A Hard Disk
--------------------
Hard disk users will want to set up a subdirectory to hold
INVENTORY MASTER and its data files. The instructions use the
suggested name of Imaster on drive C, but you can choose any
subdirectory or disk drive. At the DOS prompt, usually C>, type
the following to create the subdirectory (end each line by
pressing the <ENTER> key):
c: <ENTER>
md \imaster <ENTER>
Not so difficult! Now you must copy the program files from the
floppy diskettes onto the hard disk. Put the original diskette
in drive A. Type this command from the DOS prompt, followed by
the <ENTER> key as before:
copy a:im*.* c:\imaster <ENTER>
You'll see this response on the screen:
A:IM.EXE
A:IM.DOC
2 File(s) copied
To start the program, simply change the current directory to
Imaster:
cd \imaster <ENTER>
and type the command that invokes INVENTORY MASTER:
im <ENTER>.
Now skip over section two and read the Tutorial. It should
help you understand the nature of the program by watching as
others get it up and running.
INVENTORY MASTER USER'S GUIDE-------------------------------- 6
2. Using Two Floppy Drives
--------------------------
The first task is to make a working copy of the INVENTORY
MASTER diskette. To do this, place your DOS system disk in drive
A and a blank diskette in drive B. At the A> prompt, type
format b: /s <ENTER>
You will be prompted to insert a new diskette in drive B. Check
to make sure it's ready and the door is closed, and press
<ENTER>. When the format is complete and the DOS system is
transferred, you'll be asked if you want to format another.
Answer N for "No" and press <ENTER>.
Now replace the DOS diskette in drive A with the INVENTORY
MASTER diskette. The next command will copy the program files
onto your newly formatted disk:
copy a:*.* b: <ENTER>
With a felt tipped pen label the new disk in drive B "INVENTORY
MASTER Working Copy version 1.0 SW". Take the original from
drive A and store it in a safe place as a backup. When you run
INVENTORY MASTER, the Working Copy goes in drive A and a blank,
formatted Data disk goes in B. (NOTE: When formatting the Data
disk, leave off the "/s" from the format command above.)
You're now ready to run. With disks in place, type the
command to invoke INVENTORY MASTER from the A> prompt:
im <ENTER>.
The chapter that follows is the Tutorial. It should help
you understand the nature of the program by watching as others
get it up and running.
INVENTORY MASTER USER'S GUIDE-------------------------------- 7
T U T O R I A L
You may find it helpful to have your PC on and INVENTORY
MASTER running as you go through the Tutorial. (If you have
questions about how to install INVENTORY MASTER on your computer,
refer to the preceding chapter called Installation.) If you
enter the data along with us you'll understand the ideas a lot
faster.
We'll use a fictitious company in our examples. It's called
Northern Distribution Corporation, or NDC for short. (Whenever
you see that name, you can substitute the name of your company.)
NDC is a distributor, and warehouses several thousand different
stock items from twenty manufacturers. We call the manufacturers
who sell to NDC "vendors".
Jennifer Ryan is NDC's Purchasing Officer, and is testing
their new INVENTORY MASTER. She has an IBM-XT with a hard disk,
and the program is already installed following the guidelines in
the Installation chapter.
Step 1: Starting INVENTORY MASTER
----------------------------------
After booting up (turning on her computer), Jennifer changed
directories to Imaster, where the program is located:
cd \imaster <ENTER>
and started the program:
im <ENTER>.
Step 2: Identifying Your Company
---------------------------------
The title and copyright went by, then a screen titled "In-
House Information" appeared. This section records information
about the user's company, NDC. It automatically comes first if
you've never run INVENTORY MASTER before. At the Company Name
prompt, Jennifer typed:
northern dist <ENTER>
and the name was displayed in the top of the screen, within the
rectangle formed by double lines. This area is called the
"banner". It has the program name and version number, the date,
and now also the name of the company. From now on when you start
the program, INVENTORY MASTER will remember your company name
plus everything else you enter in the In-House Information
screen. Capitalization doesn't matter, because everything ends
up all caps anyway.
INVENTORY MASTER USER'S GUIDE-------------------------------- 8
Next, the program asked for Inventory Holding Cost.
Jennifer's boss Paul had figured that NDC's cost of capital was
the main component of the Holding Cost. It was prime + 1.75%, or
10.75% currently. To that was added 5% to cover inventory
insurance, taxes, etc. That made a total of 15.75%, so Jennifer
typed:
15.75 <ENTER>.
(The "%" should not be typed; the computer adds it and lines the
number up automatically.)
For Inventory Ordering Cost, Paul estimated the paperwork
and employee time involved in placing a line item order. From
that, he calculated that the Ordering Cost was roughly $10.00.
Fortunately, the Total Cost curve (see Figure 1) is fairly flat
on either side of the EOQ. That means that the estimates for
Ordering and Holding Costs need not be exact. If they are
reasonable approximations, then INVENTORY MASTER will give a
reasonable approximation of the EOQ. Jennifer entered the
estimate:
10 <ENTER>.
(Don't type the dollar sign "$". Also, there's no need to
include the decimal point and the trailing zeros in a number like
"$10.00". If there were non-zero digits to the right of the
decimal, then you'd have to type the decimal point and the
digits. The number will align itself properly. Ain't science
great?)
The cursor moved to "Disk drive for vendor file". Since
Jennifer wanted to keep all data on the hard disk, she tried to
enter C, but her finger slipped and she typed V instead.
Immediately a Nasty-gram flashed "Invalid Response" in red at the
lower left corner of the screen, and the V vanished. Only A, B,
C, or D are acceptable answers here. She had another chance,
thanks to the nice guys at Peery Data! So she typed:
C
without a colon and without pressing the <ENTER> key. Whenever
there's a one letter response called for, there is no need to
press <ENTER>. For instance, in Yes or No questions, a "Y" or an
"N" will do the trick just fine.
Jennifer wanted to keep the list of vendors in a hard disk
directory called Data, which was a subdirectory of Purchase. The
default answer for vendor data path was "(Current Path)", meaning
the path that the program was in. (When the program was started,
the directory was Imaster, so that was the current path.) She
typed:
\purchase\data <ENTER>.
INVENTORY MASTER USER'S GUIDE-------------------------------- 9
The next two prompts referred to the location of the
Inventory Order Report (sometimes called the Stock Report for
short). They were to stay on the hard disk too, so Jennifer
typed:
C
again. For directory path, the current one (Imaster, remember?)
would do, so the only thing needed to accept the default was:
<ENTER>.
All the information was entered, and the question appeared at the
bottom:
Is this information correct? <Y/N> Yes.
Note that INVENTORY MASTER tried to anticipate the response by
offering "Yes". Whenever a default response is shown, then just
hit the <ENTER> key to accept it, just like (Current Path) was
accepted before.
The screen looked like this:
IN-HOUSE INFORMATION
Company Name.......................... NORTHERN DIST
Inventory Holding Cost %.............. 15.75 %
Inventory Ordering Cost $............. $10.00
Where will the Vendor data be kept?
Disk drive for the vendor file..... C:
Path (Press <ESC> for current).....\PURCHASE\DATA
Where will the Stock Report be kept?
Disk drive for EOQ data............ C:
Path (Press <ESC> for current).....(CURRENT PATH)
Is this information correct? <Y/N> Yes
Jennifer was about to press <ENTER> to answer "Yes" when
Paul noticed that the paths for vendor data and the stock report
were reversed from his plan. So instead of <ENTER>, she pressed:
N
for "No". Immediately, the cursor jumped back up to the first
entry, Company Name, so that the user could correct any mistakes.
For entries that have no errors, <ENTER> will keep them and move
to the next entry. So Jennifer pressed <ENTER> for Company Name,
Holding Cost, Ordering Cost, and Vendor Drive. When she got to
Vendor Path, it said "\PURCHASE\DATA". She wanted to change it
to the same path as the main program, Imaster. There were two
choices. Either to type:
INVENTORY MASTER USER'S GUIDE-------------------------------- 10
\imaster <ENTER>
or use the automatic escape key feature. She chose the easy way:
<ESC>
and "\PURCHASE\DATA" was replaced with "(Current Path)".
The cursor moved to Report Drive, and she pressed <ENTER> to
keep it at C:. Then she arrived at report Path, which said
(Current Path). She changed that to:
\purchase\data <ENTER>.
Arriving back at the "Is this information correct? <Y/N>",
Jennifer noticed that INVENTORY MASTER had switched the answer
from "No" back to "Yes". A very optimistic program! Since all
was as it should be, she hit <ENTER>.
Step 3: Using the Menus
------------------------
Now that the preliminaries were taken care of, Jennifer saw
the Main Menu appear.
M A I N M E N U
1 Stock Data Entry
2 Vendor Menu
3 In-House Information
4 Print Menu
5 Quit
Enter your selection:
INVENTORY MASTER will accept either the number or the first
letter of the option, and no <ENTER> is necessary. This being
the first time the program was used, she wanted to enter some
vendors that NDC used frequently. The Vendor Menu was listed as
number two, so she could either press "2" or "V", the first
letter of the choice. She pressed:
V
(without the <ENTER> key) and the Vendor Menu appeared. "That
was fast!" she thought. This is what she saw:
V E N D O R M E N U
1 List All Vendors
2 Edit or Add Vendor Data
3 Main Menu
Enter your selection:
INVENTORY MASTER USER'S GUIDE-------------------------------- 11
"Hmm. There aren't any vendors entered yet," thought
Jennifer. "I wonder what would happen..." She decided to
experiment and typed:
L
for List All Vendors. INVENTORY MASTER responded with a red
"THERE ARE NO VENDORS ON FILE" Nasty-gram in the lower left
corner. After a second, the message disappeared.
Step 4: Describing the Vendors
-------------------------------
Next, Jennifer chose:
E
to begin Edit or Add Vendor Data and start adding vendors to
NDC's list. The question "Which vendor do you want to work
with?" appeared. NDC's biggest manufacturer was Johnson Valves.
She shortened it to:
Johnson
and saw this message: "That vendor is not in the file. Would
you like to add it? <Y/N>". The expected answer of "Yes" was
supplied, so Jennifer only had to hit:
<ENTER>
to add Johnson. The next screen allowed Jennifer to tell about
Johnson Valves.
Beneath the banner were the words "Vendor discount schedule
for JOHNSON". The cursor sprang to an entry called "Forecast
Factor", which currently said "100%". That 100% signified that
the forecast for next year was the same as what was sold last
year. Jennifer looked at the Sales Manager's forecast for
Johnson Valves products in the coming year: a ten percent
decline was expected overall. That meant NDC could only expect
to sell 90% of what it sold last year on the average. She typed:
90 <ENTER>.
Johnson was pretty prompt about shipping. Jennifer knew
that equipment ordered from Johnson would arrive at NDC's
warehouse in four weeks on the average. So for "Default Lead
Time" she typed:
4 <ENTER>.
Then a help box appeared below. It explained about the
terms used in describing Johnson's quantity purchase discounts.
Basically, "Lowest" means the smallest order quantity of an item
that qualifies NDC for a discount. "Highest" is the highest
INVENTORY MASTER USER'S GUIDE-------------------------------- 12
number qualifying for the same discount. "Lowest" and "Highest"
are on the same line as the "Discount" NDC gets for ordering any
quantity that falls between the two.
The cursor rested on the space for "Highest" for the first
discount. Jennifer looked at NDC's price sheet for Johnson
orders. They gave NDC a twenty-five percent discount off of list
price for any order up to a quantity of ninety-nine pieces of the
same item.
The "1" was supplied by INVENTORY MASTER as the lower
boundary for the first level discount. Jennifer typed:
99 <ENTER>
as the upper order quantity boundary at "Highest", and then
entered the discount NDC would receive under "Discount":
25 <ENTER>.
Consulting the price sheet again, Jennifer saw that an order
quantity from 100 to 999 pieces entitled NDC to a thirty-five
percent discount off list. Once again the "Lowest" number
appeared automatically, so she only had to enter the "Highest"
and "Discount" figures:
999 <ENTER>
35 <ENTER>.
At this point the help box disappeared to make room for the third
level discount information.
The price sheet said "for orders of one thousand and up, the
discount is 45% off list." The 1,000 appeared as the low number,
but "and up" is not an exact number to enter for the high figure.
Where some programs make the user input some "very large number"
such as 9,999,999 whenever an open-ended situation occurs,
INVENTORY MASTER uses a special symbol: the plus sign (+).
EVERY discount schedule ends with + in the final level's
"Highest" number. That is also the signal to the computer that
there are no further discounts after the current one is entered.
This was the last level of quantity discount, so Jennifer typed:
+ <ENTER>
45 <ENTER>.
The plus sign immediately changed to the message "(& UP)", so
Jennifer knew she had done it correctly.
The question "Is this information correct? <Y/N/D> Yes"
appeared at the bottom of the screen. "Yes" is the default
answer, which can be selected by pressing Y or <ENTER>. Another
choice is D for "Delete", meaning throw this vendor out of NDC's
INVENTORY MASTER USER'S GUIDE-------------------------------- 13
vendor list. She pressed <ENTER> to accept the discount schedule
as entered.
The screen cleared for the next vendor to be entered. The
question "Which vendor do you want to work with?" re-appeared.
Jennifer was ready to enter the schedule for Wunderbar Deutsch
Valves, so she typed:
wunderbar <ENTER>.
Once again the vendor discount schedule entry screen appeared.
Jennifer entered all of Wunderbar's data confidently, starting
with the Forecast Factor:
105 <ENTER>
(to show a projected 5% sales increase)
12 <ENTER>
(for a twelve week period between ordering from Wunderbar and
receiving the goods)
99 <ENTER>
14 <ENTER>
(for the first discount level)
499 <ENTER>
17 <ENTER>
2499 <ENTER>
20 <ENTER>
(for the second and third levels)
+ <ENTER>
23 <ENTER>
(for the last level of the discount schedule).
The screen looked like this:
Vendor discount schedule for WUNDERBAR
Forecast Factor: 105 % Default Lead Time: 12 Weeks
Lowest Highest Discount
------ ------- --------
Level 1 1 to 99 14.000 %
Level 2 100 to 499 17.000 %
Level 3 500 to 2,499 20.000 %
Level 4 2,500 to (& UP) 23.000 %
Is this information correct? <Y/N/D> Yes
It was all correct, so Jennifer typed:
<ENTER>
INVENTORY MASTER USER'S GUIDE-------------------------------- 14
and the screen cleared. She was ready to move on to stock data,
and knew she could come back and enter more vendors at any time.
At the "Which vendor do you want to work with?" question, she hit
the escape key twice:
<ESC>
<ESC>
to take herself back to the Main Menu.
Step 5: Entering Stock Data
----------------------------
From the Main Menu, Jennifer selected:
S
to go to Stock Data Entry. Immediately the familiar question
displayed: "Which vendor do you want to work with?" so the
correct vendor schedule would be used. She typed "Johnson".
INVENTORY MASTER showed her the schedule she had entered for
Johnson Valves and asked if it was correct.
"Look at this, Paul," she said. "Not only does this program
confirm my vendor choice, but it lets me make changes to the
schedule as I go!"
She typed <ENTER> to accept the schedule without changes, and the
Stock Data screen appeared. It asked for all of the information
about a particular stocked item necessary to calculate its
purchasing instructions. Part Number is whatever NDC uses to
identify its stock. She typed:
1/2" ball valve <ENTER>.
The next prompt asked for the Prior 12 Months' Sales. (INVENTORY
MASTER takes that number and multiplies it by the Forecast Factor
for Johnson Valves to project the sales for the coming year.)
Jennifer looked up the figure and typed it in:
260 <ENTER>.
The cursor jumped down and also put in the calculated Projected
Sales figure of 234 units. Since that was as good an estimate as
she had, Jennifer accepted the 234 with:
<ENTER>
and then entered the List Price of:
7.95 <ENTER>.
Johnson didn't care whether valves were ordered in multiples of a
INVENTORY MASTER USER'S GUIDE-------------------------------- 15
box quantity or not. Jennifer therefore didn't need to enter a
Box Quantity for the ball valves. The default answer is N/A for
Not Applicable, so she accepted it with:
<ENTER>.
For Lead Time, INVENTORY MASTER used the default of four weeks
set during the vendor information phase. Jennifer could accept
it by hitting <ENTER> alone, but Paul had heard word that there
would be an extra two week delay on the popular 1/2" ball valves.
She overrode the default by typing:
6 <ENTER>
to make the Lead Time be six weeks. The question "Is this
information correct? <Y/N>" appeared with the hopeful answer
"Yes" ready to be accepted. Jennifer typed:
<ENTER>.
Immediately the screen changed to the Purchasing Instructions for
JOHNSON 1/2" BALL VALVE. The Purchasing Instructions showed 31
for Order Point, or "Min" as the Max/Min systems call it, an
Economic Order Quantity of 71, and a Max of 102.
"Well, slide my rule!" exclaimed Paul, who had been watching
over Jennifer's shoulder with interest. "That was even faster
than guessing!"
"And a lot more accurate," said Jennifer. "The Order Point
shows when to order: whenever our available supply of 1/2" ball
valves falls to 31 units or less, it's time to buy. Let's see,
the EOQ is 71, so we'll order 71 valves at a time and let the
savings show up on our bottom line. The actual price we'll pay
is shown as a Purchase Price of $5.96 per unit."
"What's this Safety Stock mean?"
"That's our `margin of error'," said Jennifer. "If we know
that the demand for 1/2" ball valves is erratic rather than
constant, we can reduce our chance of stock-outs by increasing
the Safety Stock. It doesn't change our calculated EOQ, but ups
our Order Point so we always have a little more on hand to cover
unpredictable sales demands." [See the Glossary/Index for a more
complete discussion of Safety Stock.]
"Our sales of this valve are pretty regular, so let's keep
the suggested Safety Stock as is," said Paul. Jennifer nodded
and hit:
<ENTER>
to accept the numbers on the screen. INVENTORY MASTER
INVENTORY MASTER USER'S GUIDE-------------------------------- 16
automatically added the information on Johnson 1/2" Ball Valves
to the Inventory Order Report to be printed later. The screen
cleared, ready to receive new Stock Data for another Johnson
item.
For Part Number, Prior Sales, and Projected Sales Jennifer
typed:
2" butterfly valve <ENTER>
411 <ENTER>
and
<ENTER>
(to accept the estimated sales of 370 units).
For List Price and Box Quantity she typed:
25 <ENTER>
2 <ENTER>
and:
<ENTER>
to leave the default Lead Time at four weeks. In answer to the
"Is this correct?" question, she merely hit:
<ENTER>
for Yes. The Purchasing Instructions for JOHNSON 2" BUTTERFLY
VALVE were Order Point 32, EOQ 50, Max 82, and Safety Stock 4,
with Projected Sales of 370 units. The program asked her if she
wanted to modify the Safety Stock, and gave her the default
answer of "No". She hit:
Y
for "Yes", modify the Safety Stock. The 2" butterfly valves sold
somewhat irregularly, so more than the standard Safety Stock was
called for. After a discussion, they decided to up the Safety
Stock from 4 to 10 and monitor the results. Jennifer typed:
10 <ENTER>
and the Order Point was immediately changed to reflect the more
cautious position. At the question "Do you want to modify the
Safety Stock?" the second time, Jennifer hit:
<ENTER>
for the default "No". INVENTORY MASTER automatically added the
information on the screen to the Inventory Order Report. There
was no need to write down any of the numbers, because the Report
would have all of the information in one handy printout.
INVENTORY MASTER USER'S GUIDE-------------------------------- 17
After accepting the numbers the program went back to the
Stock Data screen. Jennifer decided that she wanted to see the
printout, even though it only had two part numbers on it. "Just
to see if it works," she said to Paul. The cursor was located at
the first prompt, which said "Part Number (or <ESC> for new
Vendor)". She hit the escape key:
<ESC>
and got the question "Which vendor do you want to work with?
(Press <ESC> to return to menu)". Since she wanted to get back
to the Main Menu, she hit:
<ESC>
and there was the Main Menu.
Step 6: Printing the Report
----------------------------
At the Main Menu, Jennifer had already gone through Stock Data
Entry, Vendor Menu, and In-House Information. She pressed:
P
for Print Menu. It looked like this:
P R I N T M E N U
1 Print Current Report
2 Erase Current Report
3 Main Menu
Enter your selection:
Jennifer wanted to print the information she had just calculated
under the Stock Data option. She pressed:
P
for the Print Current Report option. But the printer did
nothing. Instead, there was a beep from the computer. Paul and
Jennifer both saw a Nasty-gram at the bottom of the screen that
said "PRINTER NOT READY - Press any key when ready or <ESC> to
abort".
Paul looked at the silent printer. "The printer isn't
turned on. I bet it'll print a lot faster with electricity."
INVENTORY MASTER USER'S GUIDE-------------------------------- 18
"Very funny," said Jennifer. "And I guess if the printer
were broken, we'd just hit the escape key to cancel the print
command altogether. Okay, is it on? Let's try again." Paul
flipped the printer's power switch to "ON", and Jennifer hit:
<ENTER>.
This time the printer began printing. It was a short report
since Jennifer had only entered two parts, and it looked like
this:
01-16-1989 NORTHERN DIST Page 1
I N V E N T O R Y O R D E R R E P O R T
---------------------------------------------------------------------
Vendor discount schedule for JOHNSON
Forecast Factor: 90 % Default Lead Time: 4 Weeks
Lowest Highest Discount
Level 1 1 to 99 25.000 %
Level 2 100 to 999 35.000 %
Level 3 1,000 to (& UP) 45.000 %
---------------------------------------------------------------------
PRIOR PROJ. SAFETY LEAD LIST
PART NUMBER EOQ MIN MAX SALES SALES STOCK TIME PRICE
----------- ---- --- ---- ------- ------- ----- --- --------
1/2" BALL VALVE 71 31 102 260 234 4 6 7.95
2" BUTTERFLY VALVE 50 32 82 411 370 4 4 25.00
While the report was printing, the message "PRINTING REPORT"
flashed on the bottom of the screen, followed by "CLEARING FILE".
Once the report is on paper, the disk file is cleared for new
input. Just to see what would happen, Jennifer tried to print
the report a second time, and a Nasty-gram appeared: "THE REPORT
FILE IS EMPTY".
"I guess this program knows when we've already got a hard
copy," said Paul. Jennifer nodded. She was finished with
printing, so she hit:
<ESC>.
The Print Menu was replaced by the Main Menu.
"This is where I came in," said Paul. "What do you think of
INVENTORY MASTER now that you've run through its features?"
"It's great, Paul!" said Jennifer. "It does everything I
want, and in a straightforward way that'll make using it a
breeze. My time can be freed up for other matters, and we'll
INVENTORY MASTER USER'S GUIDE-------------------------------- 19
really save money. In fact, I think I'll do all of our inventory
now. It was so difficult to evaluate our Max/Min's the old way
that we're way overdue. I wish we'd had INVENTORY MASTER years
ago!"
INVENTORY MASTER USER'S GUIDE-------------------------------- 20
G L O S S A R Y / I N D E X
Listed here are the key terms used in this User's Guide.
They have been arranged in alphabetical order, with a page
reference to the main text where the expressions are used.
Following that is a brief discussion of the term. Every defined
term in the Glossary is capitalized, so you can refer to another
related term if it appears in an explanation.
Cost of Capital Pg. 2, 8
Assuming you finance your inventory, it is the interest you
pay. If you pay your own cash for stock, then it is the
opportunity cost of tying that cash up in inventory. Do not
confuse Cost of Capital with the capital itself, which is
the money spent on the physical inventory alone.
Discount Schedule Pg. 11
Normally a Vendor will offer you discounts if you purchase
in larger and larger quantities. A table of the amount of
the discount off of List Price and the quantities you must
order to qualify for each successive discount is known as a
Discount Schedule. You must decide if it is worth it to
your company to order a larger amount at a lower price.
INVENTORY MASTER does that analysis for you automatically,
and reflects the result in its purchase instructions.
Economic Order Quantity (or "EOQ") Pg. 2
For a given part, the EOQ is the mathematical quantity to
order that results in the lowest Total Cost to the company
over time.
Forecast Factor Pg. 11
This percent is the basis for creating the Projected Sales
figure from the prior year's sales. The Forecast Factor is
set for the Vendor as a whole, rather than for each part.
If the expectation is that the next twelve months will see
the same sales as the preceding twelve months, then the
Forecast Factor should be set to 100 % (the default). If a
given Vendor's products are expected to undergo a five
percent sales increase overall, then set the Forecast Factor
to 105 %. For an eleven percent decline, set the figure to
89 %. The Forecast Factor is entered during the Vendor
editing. Note that the Projected Sales for any part
generated from the Forecast Factor can be overridden during
Stock Data Entry.
Holding Cost Pg. 2, 8
Holding Cost is the cost associated with holding inventory,
usually expressed as a percent of the average value of the
inventory over one year. Holding Cost is composed of Cost
of Capital, inventory tax, inventory insurance, and others.
(Warehouse rental can be included only if you consider it an
expense that can vary closely with the total size of your
company's inventory. Otherwise, rent is a fixed cost.)
INVENTORY MASTER USER'S GUIDE-------------------------------- 21
Note: Care should be taken to estimate Holding Cost (as
well as Ordering Cost), but a precisely accurate figure is
not necessary to receive benefits from INVENTORY MASTER. If
your estimate is reasonable, then the EOQ generated will be
effective. The graph on page 2 shows that the Total Cost
curve is virtually flat in the vicinity of the EOQ. For
that reason, a "close miss" will not appreciably raise the
Total Cost.
Lead Time Pg. 11, 15
When a company places an order with one of its Vendors,
there is an inevitable delay before the stock arrives in the
company's warehouse and is available for re-sale. That
delay is called the Lead Time. One of the purchasing
agent's jobs is to see that an order is placed early enough
that it is on hand when needed. For each Vendor -- and
sometimes for each part -- there is an average Lead Time
which the purchaser has come to expect, generally expressed
in weeks. That figure is used within INVENTORY MASTER's
Order Point calculation.
List Price (or "List") Pg. 14
Come on, you know what this is! It's the figure listed in
the catalogues as the price charged to end users.
Distributors always buy for less than List, and with large
orders will frequently pay substantially less (see Discount
Schedule).
Max/Min Pg. 15
Many inventory control systems are based on Max/Min's. They
express in a different way virtually the same thing that
INVENTORY MASTER does. The Min is their Order Point. The
Max is the amount to order UP TO, that is, you order the
DIFFERENCE between whatever you have on hand and the Max.
For us, the Max is simply the Order Point plus the EOQ.
Order Point Pg. 15, 16
The Order Point is a quantity of an item on hand; when the
inventory of that part has been reduced to a number equal to
or less than the Order Point, then the time has come to
place a new order. The quantity of the order is given by
the EOQ. The Order Point is determined by the rate of
demand for the item (the expected or average unit sales per
week), the weeks of Lead Time, and the amount of "cushion"
provided by the Safety Stock.
Ordering Cost Pg. 2, 8
Ordering Cost is the sum of all expenses incurred each time
a company places an order for an item. Time to process the
paperwork (times the appropriate salary), warehouse
receiving time when the order arrives, and some portion of
expediting effort are expended with each order placed. For
a manufacturer, Ordering Cost would be made up mostly of the
set-up cost to produce one lot. (See note under Holding
Cost.)
INVENTORY MASTER USER'S GUIDE-------------------------------- 22
Projected Sales Pg. 14, 16
This figure is the estimate of the sales of a given part
over the coming year. It is based on the prior sales which
the company has made in the past year, multiplied by the
Forecast Factor. It can be overridden by the user if he has
other criteria for making his projection.
Safety Stock Pg. 15, 16
If the exact timing of both customer sales and Vendor
deliveries were known, then there would be no need for a
Safety Stock. You would never suffer a stock-out, and pigs
would fly. But here on Earth customer orders are only
roughly predictable, so you never know exactly when you'll
need more stock from the Vendor. Even if you did, delivery
times can vary widely for some Vendors. So the amount kept
on hand is augmented by an extra quantity called the Safety
Stock.
In the case of a "bread-and-butter" item that always sells
about X units a month, supplied by a Vendor who always gets
it there in about Y weeks, the Safety Stock can be kept low.
For other parts with either an erratic delivery schedule or
big swings in demand: if it's important to avoid stock-
outs, keep a substantial Safety Stock.
The exact amount to assign is difficult to say. One
approach is to monitor the so-called "service factor" of a
stock item, which is the percent of orders received that
were filled from stock, ie, not back ordered. A typical
target might be 93 - 96 % service. If you are under 93 %,
then increase your Safety Stock. If you're over 96 %, then
DECREASE your Safety Stock: you're carrying too much
inventory. Over time, this monitoring process will yield
numbers that will give you the service level you desire.
Total Cost Pg. 2
The sum of a year's worth of purchasing cost for a given
stock item. The components of Total Cost are Holding Cost
and Ordering Cost. Note that the actual capital tied up in
inventory is NOT included. Only the costs associated with
the year's purchasing is included, not the price of the
purchase itself.
Vendor Pg. 11
A Vendor is a manufacturer who sells stock to you. This is
the stock you hold in inventory for eventual resale to your
customers (see Discount Schedule).
INVENTORY MASTER USER'S GUIDE-------------------------------- 23
T E C H N I C A L S T U F F
All of our filenames begin with "IM". IM.EXE is the program
file itself, and IM.DOC is a copy of this User's Guide. When
INVENTORY MASTER first runs, it will create three data files:
IMHOUSE.DAT, IMVENDOR.DAT, and IMREPORT.DAT. You need not
concern yourself with these files; INVENTORY MASTER will maintain
them for you. The first file has information about your company,
the second holds a list of the vendors you buy from, and the last
contains the Inventory Order Report. IMREPORT.DAT grows longer
as you add more stock data, but after printing the report the
file is cleared; the length is then zero.
The location of two of these data files is chosen by you in
the In-House Information screen. The third, IMHOUSE.DAT, is
always located in the same directory as the program file IM.EXE
without giving you a choice. That way, your company constants
are always where INVENTORY MASTER can find them.
Other temporary files are created and deleted while the
program is running. They will all be located in the same
directory as IM.EXE and IMHOUSE.DAT, and will all have an
extension of "TMP". An example is IMCD.TMP, and if all goes well
you'll never see them. If there is a power outage while you're
using INVENTORY MASTER, some of these transient files may not be
properly deleted. No problem. If for some reason they're not in
the current directory next time you use the program, INVENTORY
MASTER will coolly ignore them. If they are (the more likely
case), they will be deleted during the session without muss or
fuss or inconvenience to those in surrounding offices.
W A R R A N T I E S
Well, there aren't any. Peery Data is not responsible for
hardware or software problems and does not agree to compensate
any user, registered or otherwise, for any damages whether or not
they were caused by this product or any other used in conjunction
with this product. For registered users, our limit of liability
is to replace defective diskettes if they came from Peery Data or
to refund the total amount of the registration fee.
INVENTORY MASTER USER'S GUIDE-------------------------------- 24
R E G I S T R A T I O N
When you register your shareware copy of INVENTORY MASTER,
you will receive a printed and bound User's Guide, a copy of the
latest shareware version on 5.25" diskette (the one you found may
or may not be the latest), and our undying gratitude. As an
added incentive, this registered copy will not contain the
shareware "reminder" message at the end of the program.
In addition, your name will be placed on our list of
registered users, entitling you to receive new product
announcements and upgrade information. Please use the form on
the next page when registering. As long as people like you
support our efforts, we'll continue to develop high quality
software at far lower than commercial prices.
Our Technical Support is limited, but those who are
registered are entitled to it. If you have a problem, write to
us at this address:
Peery Data, P.O. Box 12235, Charlotte, NC 28220.
On the envelope put "Ref: INVENTORY MASTER". Please include:
(1) your version number (this User's Guide is for shareware
Version 1.0 SW),
(2) the type of computer system you're using,
(3) a DETAILED description of the problem, and
(4) your name and address so we can respond.
There's no guarantee we can solve your problem, but we'll
sure give it a try!
.---------------------------------------------------------------.
| |
| INVENTORY MASTER ORDER FORM |
| Version 1.0 SW |
| |
| This is a professional "shareware" product, supported |
| solely by your generosity. Help keep down the cost of future |
| software development by registering promptly! Thank you. |
| |
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| P.O. Box 12235 |
| Charlotte, NC 28220 |
| (Prices subject to change |
| without notice. Jan, 1989) Number of Extended |
| Copies Price Price |
| |
| Registration alone............. ________ X $84.95 = ________ |
| Registration, Printed Manual, |
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| on 5.25" Diskette........... ________ X $99.95 = ________ |
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| ======== |
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| Please print: |
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| Phone (______) ___________________________ |
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| Say! Where did you get your shareware copy of INVENTORY |
| |
| MASTER anyway?_____________________________________________ |
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| Thanks! |
`---------------------------------------------------------------'
