AUTOMATIC REPLENISHMENT SYSTEM

ARS THEORY

What is Automatic Replenishment System (ARS)?

ARS as the name suggests is an automatic way to replenish your stocks on floor.

You have SKUs and then you select the target qty. & re order point for the same.

Target Qty. Is the maximum qty. which you want to keep in store.

Re order point is the when the stock level @ store becomes equal to the same, a STO for the new stock transfer is generated automatically by ARS.

For example,

• there is a casserole which you want that you should have at least 50 pcs in your store every time
• suppose you sell 5 pcs a day that means you want to have stocks for minimum 10 days
• suppose the stocks take 4 days to reach the store from warehouse

Now minimum stocks is 50 that you want to keep so the re order point has to be 70 as it will take 4 days to reach the store so you should have 20 pcs more than 50. So you select the target qty. which is the maximum qty. you want to keep on floor anything between 80-100 (according to the floor capacity/Promotions), so you will be having 80-100 pcs on floor and as soon as the floor qty. touches 70 a new Stock transfer Order is generated which triggers transfer of difference qty. to the floor. By the time stock reaches the floor you will be having minimum of 50 pcs on floor.

Now situations are never so simple and easy @ floor in practical scenario.

ISSUES:

• slow/fast moving of the product

We can never be sure that the movement of the stocks i.e. the sales of the stocks left with us will be @ the same pace which we have thought of i.e. instead of moving 5 pcs a day you got an order of 50 pcs the very first day of STO generation so you are left with only 20 pcs, now you have only 20 pcs for next 4 days.

• stock connectivity on the floor

The transport vehicle which was carrying your stocks broke down.

• wrong forecasting(Bull Whip Effect)

Due to some customer order or promotion you had 5 pcs a day’s sale of casserole and now you have loaded the ARS accordingly but this year you didn’t had any such promotion or customer order so your sales/day decreases leading to high stock cover...Bull Whip Effect

• Wrong in warding of the stocks

Stocks have been in warded by wrong article code, your system shows 0 qty. of the same so same qty. is ordered again automatically by ARS leading to over stocking situation.

• Wrong Out warding of the stocks

Some other article have been sold at casseroles article leading to fall of floor count which will trigger the new STO generation leading to over stocking situation. OR you are selling casserole @ some other article so the floor stock becomes 0 but system still shows 100 qty. so the STO is not generated for the same.

• Manual generation of STOs

Sometimes manually STOs are generated which leads to over stocking, like if you are having enough stock of casseroles in warehouse then you generate manual STO in order to get the stock liquidated before it ages out, so all the ARS gets dis balanced here.

• Delay in STO generation

This is another issue being faced in the retail world that the STO generation is not done on time which leads to fall of minimum qty. which needs to be on floor.

Aftermath of above stated Issues:

• Normally you never work @ 100% of the ARS target qty. i.e. MBQ ratio.
• You always work @ 80% - 95% of the MBQ ratio.

After setting the ARS according to me you should check the below stated four points and you will be get a clear picture of what should be done and what not.

Let the ARS set by you work for 1 month and after that go ahead by4 laws of theory given below:

LAW 1 : If your floor situation says that you have excessive stocks on floor and you MBQ ratio is more than 100% then don’t change the ARS as your MBQ ratio( floor stock/ARS tgt qty.) is already >100% new order won’t be generated till re order point is touched, wait, sell and then your floor situation will be normal again.

LAW 2: If your floor situation says that you have excessive stocks on floor and you MBQ ratio is less than 100% then you need to decrease you ARS as already your floor is over stocked and MBQ ratio being lesser than 100% will trigger more STO generation which will worsen the situation on floor.

LAW 3: If your floor situation says that you have fewer stocks on floor and you MBQ ratio is more than 100% then increase the ARS. You are already having lesser stocks and ARS is more than 100% so the STO generation will take more time, so you need to immediately get the ARS increased. Need to check the flow of the stocks too in this scenario.

LAW 4: If your floor situation says that you have fewer stocks on floor and you MBQ ratio is less than 100% then don’t change the ARS as floor says you have less stock and MBQ ratio is also less than 100% so new STO will be generated and more stocks will flow in leading to balancing the stock levels on floor.