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Understanding Maximo Inventory Related Terminology

Question & Answer


Question

Are there any terms that would help in the understanding of Maximo inventory functionality?

Answer

Yes, understanding inventory terminology is essential for working with Maximo.

Here are a few of the key terms that you need to understand in order to take advantage of the robust inventory-related functionality in Maximo:

Safety Stock: This stock is the minimum stock balance that you want to have on hand.  The actual value is based on how critical the inventory item is to your operation.


Reorder Point (ROP): Reorder point is the balance level at which you want your inventory reorder to take place for the item. The calculation is a forecast of demand over lead time plus a calculation of safety stock.

The ROP is used to trigger the reorder process for the item based on the following calculation:

Available Balance + Stock on Order =< (Equal to or less than)

(Available balance is the current balance - reserved quantity (reserved quantity is the quantity on all approved work orders referencing that item in the storeroom) - expired stock)
(Stock on order is the quantity on all PRs and POs for that item at that storeroom where PO/PR status is not closed or cancelled)

When the work order has the "Required by Date" populated for the item, the reorder process cannot reorder items if the SYSDATE + LEADTIME < REQUIREDBYDATE.

Setting the ROP to 0 can still reorder the item if the Available Balance + Stock on Order drops to 0.


Economic Order Quantity (EOQ): From a Maximo reorder point of view, EOQ is the quantity that is reordered once the reorder process is triggered for the item.

EOQ refers to the optimum ordering quantity to keep inventory investments to a minimum. In other words, smaller ordering quantities would keep the inventory down, but would generate higher costs alternatively larger ordering quantities keep costs down but increase the cost of keeping the item in stock.


How does the reorder process come together?

Once safety stock levels are set, the ROP can be considered.

You can use various inventory reports to gain this information.

Lead Time is the time between approval of the PO for an item and its receipt date.

Lead time demand is usage during lead time.

"A" is the average number of days in a month = 30.44

(1/1.6)th is the 1.6th root. 1.6 root (2 * Std Dev of Lead Time * (Lead Time/A))

Once the ROP is set the next value to be considered is the EOQ.

EOQ = sqrt (2AS / IQ)
sqrt is Square Root of
A = Default Unit Issue Cost picked up from the Inventory Control Main screen as defined from Application Setup-Inventory Options-Defaults Costs-Issue Costs
S= Ordering Cost (The value is inputted into the report)
I = Carrying Cost (A Carrying Cost percent is prompted - Carrying costs are calculated at this percent value * Default Issue Cost)
Q = Total usage for the last 365 days.


To calculate EOQ for reordering to the maximum. If you want to reorder to the maximum level, you can write an EOQ report to set the EOQ according to the MAXIMUM value as follows:

Quantity to be purchased (EOQ) = (MAXIMUM - ROP + Availability) / conversion rounded EOQ up to the nearest integer
where MAXIMUM = MAXIMUM value to replenish CONSIDERING conversion
AVAILABILITY = (Current Balance + On Order - Reservations - Expired)
Example: ROP = 5, EOQ = 5, Current Balance = 3,
Availability = 3, conversion = 1
TO reorder to MAXIMUM of 10...
EOQ = (10 - 5 + 3)/1 rounded up = 8

If the reorder routine is run, it takes ROP (5) - AVAIL (3) = 2 in multiples of EOQ (8) according to conversion (1) to replenish a value greater than the ROP (5).  The value would be 1 multiple of 8.

The final amount in the storeroom would be the MAXIMUM of 10 (2 + 8 = 10)

Some Additional Organization related definitions and options:

Inventory Defaults:

Type A,B,C Breakpoint Table.Column:   MAXVARINPUT.A_BREAKPOINT, MAXVARINPUT.B_BREAKPOINT, MAXVARINPUT.C_BREAKPOINT = Percentage of inventory items associated with ABC Type A, B, or C used in ABC inventory analysis. For example, enter 30 to specify thirty percent for one of the fields.


Update Cost/Currency Variances on Inventory Costs Table.Column:   MAXVARINPUT.UPDATEINVENTORY Specifies whether the system copies the cost and currency differences (INVOICETRANS) to the variance accounts for the storeroom. If the check box is selected, the system copies the cost and currency differences. If the check box is cleared, the system does not copy them.

Negative Current Balance Table.Column:   MAXVARINPUT.NEGATIVECURBAL Specifies whether Maximo allows users to issue or transfer items with a negative current balance. If Allow Negative Balance is selected, users can issue items with a negative balance. If Disallow Negative Balance is selected (the default), users cannot issue such items. NOTE: Maximo checks balances at the Bin level, not the Storeroom level.

Inventory Reorder:

External Request Creation Table.Column:   MAXVARINPUT.AUTOPOEXT Specifies the type of purchase requisition or purchase order that Maximo creates when a reorder request uses external vendors. Choose one of the four options. The default is an unapproved purchase requisition.

Internal Request Creation Table.Column:   MAXVARINPUT.AUTOPOINT Specifies the type of purchase requisition or purchase order that Maximo creates when a reorder request uses internal vendors. Choose one of the four options. The default is an approved purchase order.

Maximum Number of Reorder Lines per PO/PR Table.Column:   MAXVARINPUT.MAXPRLINES Specifies the maximum number of reorder lines that can appear on a purchase order or purchase requisition. The default is 40.

Inventory Costs:


Issue Cost Table.Column:   MAXVARINPUT.DEFISSUECOST For the selected site, specifies whether Maximo uses standard cost (the default) or average cost when an item is issued.

Non-capitalized Rotating Table.Column:   MAXVARINPUT.COSTFROMASSET For the selected site, specifies whether Maximo uses issue cost (the default) or asset cost when a non-capitalized rotating asset is issued. The setting applies only to the selected site.

Available in version 7.5 and Later:

LIFO: (Last in first out) This costing method uses the receipt cost of the items that were most recently purchased and are the newest in the storeroom.

FIFO: (First in first out) This costing method uses the receipt cost of the items that are the oldest in the storeroom.

These costing methods allow for greater flexibility when deciding how to value your inventory.

InvReservationResTypeUpdateCronTask

CronTask to change an Inventory Reservation from APSOFT to APHARD based on the following conditions:

1. Restype must be APSOFT

2. INVRESERVATION.REQUIREDDATE is before current date + INVENTORY.DELIVERYTIME + MAXVARINPUT.RESBUFFER

Understanding these terms and some of the calculations involved can help you to effectively use Maximo inventory functionality.

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Document Information

Modified date:
30 April 2020

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swg21384733