Table of contents
- Quantity to order = min balance + reserves + demand rate × planning depth - balance - deliveries in transit. Bimp calculates it in the "Need to purchase" column of the "Purchase planning" report.
- In the example for bottle caps: 20,000 + 4,000 × 31 - 38,000 = 106,000 pcs. For bottles the result is 4,000 pcs, because 60,000 are already in transit, and for labels it is -576,000, so there is nothing to order.
- The scenario covers calculation by min/max and demand rate. Needs from product specifications are not calculated in it, and the demand rate of seasonal products has to be kept up to date.
The company is fictional. Every action in Bimp is a real product feature.
To work out how to calculate purchase order quantity you need one formula: min balance plus reserves plus the demand rate over the planning period, minus the stock in the warehouse and minus deliveries in transit. In Bimp this figure is shown by the “Need to purchase” column, and the buyer does not reconcile balances by hand. The fictional Clearbrook Beverages arrived at this after its filling line stood for a shift and a half without caps.
What happened at Clearbrook Beverages?
Clearbrook Beverages fills lemonades and juices, has 35 people and sells to retail chains and distributors. A glass bottle, a cap and a label come from three different suppliers. Caps take three weeks to arrive, which is 21 days.
The buyer decided what to order from a stock spreadsheet and his own feel. The spreadsheet showed 38,000 caps, and the figure looked sufficient. The line uses 4,000 caps a day, so the stock lasted 9.5 days. The supplier delivers in 21 days, so an order placed against that balance would have arrived after the stop. The line stopped the day before the scheduled filling.
The notional losses are these. The line runs two shifts and makes 4,000 bottles a day, and a shift and a half of downtime took away 3,000 bottles. At a selling price of €0.35 the shortfall is €1,050 of revenue. At the same time the warehouse holds half a year of labels: 720,000 pieces against consumption of 4,000 a day, which is 180 days. A label costs €0.015, so €10,800 is frozen in that stock. The shortage and the surplus had one cause: quantities were set by eye.
How to calculate purchase order quantity from min/max and demand rate?
In Bimp the need is calculated by the formula from the help:
Need to purchase = Min balance + Reserves + (Demand rate × Planning depth) - Physical balance - Expected deliveries
Planning depth is the number of days from today to the “Plan until” date. By default it is 31 days. Next come the six steps that the Clearbrook buyer went through.
Step 1. Parameters in the product card
In the cap card (Warehouse → Products and services) open the “Planning” section. The buyer enters “Demand rate per day” 4,000, “Safety stock, days” 5 and “Delivery time, days” 21. In the “Accounting” section “Min balance” is 20,000, the same 5 days of demand (4,000 × 5), and “Max balance” is the level of full replenishment. If the rate is left at zero, Bimp takes it from the sales of the previous month. Details are in the help Purchase planning.
Step 2. Calculation for a date
The buyer opens Purchases → Purchase planning and chooses the “Plan until” date. The report shows each product with its supplier, balance, reserve, available balance and the “Need to purchase” column. Reserves and goods in transit are taken into account automatically. For three Clearbrook items (no reserves, depth 31 days, demand 4,000 a day, which is 124,000 for the period) the result was as follows:
| Product | Min balance | Demand for 31 days | Balance | In transit | Need to purchase |
|---|---|---|---|---|---|
| Cap | 20,000 | 124,000 | 38,000 | 0 | 106,000 |
| Bottle | 30,000 | 124,000 | 90,000 | 60,000 | 4,000 |
| Label | 20,000 | 124,000 | 720,000 | 0 | -576,000 |
For the cap: 20,000 + 124,000 - 38,000 = 106,000 pieces. For the bottle: 30,000 + 124,000 - 90,000 - 60,000 = 4,000. For the label: 20,000 + 124,000 - 720,000 = -576,000. A negative result means the stock covers both the minimum and 31 days of demand, so there is nothing to order.
Step 3. A supplier order from Excel
The buyer filters the report by the cap supplier and exports it to Excel. In Purchases he creates a supplier order and on the “Products, services” tab clicks Import. The file is uploaded from Excel, and its columns are matched to the “Product”, “Quantity” and “Price” fields. Caps at €0.012 for 106,000 pieces come to €1,272 (106,000 × 0.012).
A balance of 38,000 lasts only 9.5 days, and delivery takes 21 days. So from one calculation the buyer makes two orders: an urgent batch of 60,000 pieces delivered in 7 days and a main batch of 46,000 pieces in 21 days. Together 60,000 + 46,000 = 106,000. On day seven the stock will be 38,000 - 7 × 4,000 = 10,000, the urgent batch lifts it to 70,000, and the line has something to run on until the main batch arrives.
Step 4. The supplier’s names
The supplier calls the cap “KR-38 gold”, while in the database it is “Cap 38 mm”. The match is created on the “Supplier products” tab of the product card. The “Supplier’s product name” column is turned on in the order with the gear icon, and the manager gets a delivery note that can be checked without translation (Supplier products).
Step 5. Planned date and status
In the order header the “Shipment date” field holds the planned date the goods arrive in the warehouse. For the urgent batch it is day seven, for the main one day twenty-one. The order status is changed manually: “New”, “In progress”, “Confirmed”, so every order shows its stage (Supplier order).
Step 6. The order fulfillment report
The “Receipts by Supplier” analysis compares ordered and received and shows what is still expected. The cap supplier under-delivered part of the main batch. The shortfall is visible in the order line (Receipts by Supplier).
What does the owner see in the reports?
In the “Purchase planning” report the owner looks at the “Need to purchase” column across the whole range. Items with a plus wait for an order, items with a minus need nothing. In our table the caps (106,000) and bottles (4,000) go to order, and labels do not.
In the “Receipts by Supplier” analysis at the end of the month there are two cap orders at €0.012:
| Order | Status | Ordered | Received | Remaining |
|---|---|---|---|---|
| Urgent batch | Shipped | 60,000 pcs, €720 | 60,000 pcs, €720 | 0 |
| Main batch | Partly shipped | 46,000 pcs, €552 | 30,000 pcs, €360 | 16,000 pcs, €192 |
Let us check the sums. Ordered is 720 + 552 = €1,272, which matches the calculation 106,000 × 0.012. Received is 720 + 360 = €1,080, or 90,000 pcs. The shortfall of 16,000 pcs worth €192 (16,000 × 0.012) is the supplier’s obligation, which the buyer clarifies the same day.
Labels stop freezing money. A need for them will appear when the balance drops to 144,000 pieces (20,000 + 124,000). From 720,000 this happens in (720,000 - 144,000) / 4,000 = 144 days, and only then will the report show a plus.
Caps ran out the day before filling, the line stood for a shift and a half and missed 3,000 bottles worth €1,050. At the same time the warehouse holds half a year of labels worth €10,800.
Product cards hold the demand rate, min balance, safety stock and delivery time. The “Purchase planning” report calculates the need, the supplier order is uploaded from Excel, and fulfillment is visible in the “Receipts by Supplier” analysis.
Notional calculation for caps: 20,000 + 4,000 × 31 - 38,000 = 106,000 pcs, €1,272. Bottles need 4,000, because 60,000 are already in transit. Labels need no order, and the next need arises in 144 days.
What does this give the company?
Purchasing in beverage production depends on long delivery times for glass, caps and labels. So a calculation 31 days ahead with deliveries in transit gives the buyer more than today’s balance in a spreadsheet.
The buyer gets a figure that can be checked with arithmetic, and a basis for a conversation with the owner about why exactly 106,000 was ordered. The owner sees a shortage in advance, a week or more before filling. By the notional figures one stop cost €1,050 of revenue, while the surplus of labels tied up €10,800. The buyer would have seen both sums in the report before they arose.
How to choose safety stock and the reorder point is covered in Safety Stock and Reorder Point Formulas: How Much to Order from a Supplier. If purchasing depends on material consumption norms for products, the article on material usage variance will help. The purchasing features are collected on the Procurement page, and Bimp is a cloud ERP for manufacturers, built in Ukraine, where they work next to the warehouse and production.
Scenario limits
The scenario shows calculation by min/max balances and demand rate. Needs from product specifications are not counted here: Bimp takes the balance, reserves, sales rate and deliveries in transit. The demand rate in the card is set by hand or Bimp takes it from the sales of the previous month, so before the summer peak for lemonades it should be reviewed. A supplier order from the calculation is created through an Excel export and import, and the help describes no separate button for it. The supplier, delivery time and price of the caps in the example are invented, and the figures should be replaced with your own.
FAQ
What formula does Bimp use to calculate how much to order from a supplier?
Need to purchase = min balance + reserves + (demand rate × planning depth) - physical balance - expected deliveries. Planning depth is the number of days to the "Plan until" date, 31 days by default.
What happens if you leave the demand rate empty in the product card?
If you leave 0, Bimp calculates the rate from the sales of the previous month. For seasonal products such as summer lemonades, it is better to enter the rate by hand and review it before the peak.
Does the calculation take goods already ordered from the supplier into account?
Yes. Goods in transit under created supplier orders are subtracted from the need, so the same item is not ordered twice.
How do you pass the calculated need into a supplier order?
Filter the report by supplier, export it to Excel, create a supplier order and upload the file with the "Import" button. In the import window you specify which column matches the product, quantity and price.
Book a demo and together we will fill in the min balance and demand rate for your raw materials, then look at what "Need to purchase" shows.
Book a demo