Minimize Stockout Cost
The Minimize Stockout Cost feature enables stockout costs to be incorporated in the Inventory Optimization calculation to influence the mix and depth of items stocked.
Some examples of stockout costs are:
• The cost of a loan when a part is not available
• A penalty written into service contract
• The cost of expediting
The Inventory Optimization calculation can utilize the stockout cost values to compute expected costs and influence the recommended inventory mix. For example:
• Expedite critical parts to maintain high service level or minimize downtime
• Define stockout costs that are different for each SKU and include any penalty costs
The setting of stockout costs is evaluated using a waterfall approach:
• Stockout Costs defined on the SKU are given priority.
◦ If there is no stockout cost defined on the SKU, then the Part is evaluated for stockout costs.
▪ If there is no stockout cost defined on the Part, then the Inventory Optimization Planning Parameter is evaluated for stockout costs.
▪ If there is no stockout cost defined on the Inventory Optimization Planning Parameter, then the Service Group Parameter is evaluated for stockout costs.