How does Vanguard determine Suggested Order Quantity?
The Vanguard Predictive Planning platform has one job: to enable strategic decision-making based on the most accurate and relevant data available at any given time. Part of this job, particularly when acting as a supply chain optimization engine, is to recommend daily order quantities (at the SKU or BOM level) that are needed to satisfy customer demand. But, of course, there’s a lot more to that than meets the eye.
What is Suggested Order Quantity?
Suggested Order Quantity (SOQ) is the number of units (SKUs or BOMs) the system is recommending to be ordered at a given time to satisfy future customer demand.
How is SOQ determined?
The system has an immense amount of data and constraints to consider when determining the SOQ for an item. Those considerations can be broken into three main areas:
Demand Plan – of course, the Demand Plan dictates the ideal number of units needed for a specific period. Vanguard uses advanced analytics and a collaborative forecasting process to derive an accurate Demand Signal. The Demand and Supply Plans then use a unified data model so the SOQ is updated in real time if the Demand Plan changes.
Current Inventory / Safety Stock – The system also needs to account for any existing product availability to avoid overproduction. Vanguard is able to analyze current inventory data to determine what needs to stay, to shift locations, or be replaced. How much new product is needed after those considerations are reflected in the SOQ.
Constraints – In an ideal world, supply would always be able to meet demand. However, real-world capacity constraints (whether driven by physicality or business rules) mean Vanguard must be careful in only suggesting order quantities that can be filled in the appropriate period. To solve for this, the system takes into account an unlimited number of constraints and may choose to, for instance, shift production to an earlier date or to another supplier to meet market demand. Examples of common constraints include:
- Financial resources
- Raw material resources
- Machine availability
- Labor hours
- Production space
- Min/Max order levels
- Transportation availability
- Freight space
- Warehouse space
- Distribution availability
So now that the system has generated an SOQ at the SKU or BOM level based on all the available data, how is it used? The answer here is simple: SOQ should flow directly into a Purchase Order, as it is truly the optimal number of items needed to meet future demand. To learn more about how Vanguard Predictive Planning optimizes supply chain performance, contact us or request a demo.