K-Curve Methodology
K-Curve Management provides an operational approach to determine order quantity for order planning.
K-Curve Management starts with the overall performance metrics, workload and inventory, as goals. Then, it derives order frequencies that can achieve those goals in some optimal fashion. An optimal exchange curve (workload vs. inventory) is then calculated to enable the management decision on the system operating point.
Benefits of K-Curve Management
• Provides a systematic approach to evaluating the trade-off between work load and inventory.
• Provides a standard design approach for minimum inventory order plans with more than three order frequencies.
• The parameter K links ABC order plans to EOQ theory.
• Inventory savings of 10%-15% can be realized when using 7 order frequencies versus the traditional ABC plans with only 3 order frequencies.
Steps in K-Curve Management
3. Create KCM scenarios. KCM scenarios are a tool used in K-Curve Management to simulate quantity and value of cycle stock to find the EOQ value.
4. Run KCM scenarios. Running the KCM scenarios simulates quantity and value of cycle stock for assigned segments and order frequency sets over a range of K-values.
5. View and manage KCM scenario results. As you manage the results, you try to find the best point on the exchange curve for the operationally optimal EOQ value. Selected K-Value and corresponding average inventory dollar value and total receipts can be compared across scenarios.