Cycle stock is inventory available (or planned to be available) for the normal demand during a given period excluding excess stock and safety stock. Cycle stock is the portion of inventory that results from the size of orders placed at the source. Inventory level variation occurs here. In a Network Optimization model the average cycle stock is approximated as half the order size. This is demonstrated in the following graph:
The average cycle inventory is shown by the red line and has a value of 1 unit in this example. The order size is 2 units and occurs once per unit time. Cycle stock is calculated within Network Optimization. For additional information about cycle stock, see In-transit inventory.
Calculating cycle stock
There are 2 categories of cycle stock:
- Replenishment cycle stock (for Site Sourcing Policies).
- Production cycle stock (for Production Policies).
Cycle stock is highly dependent on two main components: the replenishment frequency/production frequency, and the product flow over any period. Note the following two graphs illustrating replenishment cycle stock.
Q, as seen in these graphs, is calculated by taking the Replenishment Frequency and multiplying it by the average daily flow to the site. Cycle stock is calculated by taking the maximum of Q and the Minimum Order Quantity, if specified, and dividing by two.
Minimum Order Quantity does not apply to lanes that serve customers. Cycle stock is not calculated at the customer.
Replenishment cycle stock
Specifically, replenishment cycle stock (RCS) is calculated using:
Replenishment Frequency (RF) on the Transportation Policies table.
Flow from Site A to Site B for product (p), mode (m), time period (t).
Minimum Order Quantity (Q) on the Site Sourcing Policies table.
Period length in days (T).
The calculation is as shown:
where:
RF = Replenishment Frequency
T = period length in days
Q = Minimum Order Quantity
y = 1 if flow (A,B,p,m,t) > 0
Specifying a Minimum Order Quantity specifically adds a binary variable to the linear program, increasing its run-time on average by a factor of two. Do not use this field unless absolutely necessary.
The Replenishment Frequency field can be found in the Transportation Policies table – not in the Inventory Policies table. This is because the time is based not just on product and site, but on the mode of transportation as well. For instance, the Replenishment Frequency for an air mode can be different than that of an LTL mode.
The final cycle stock is reported in two Network Optimization output tables – the InterSite Flows table and the Network Inventory Summary table.
Production cycle stock
Specifically, production cycle stock (PCS) is calculated using:
- Production Frequency (PF) on the Production Policies table.
- Production at Site A for product (p), time period (t).
- Minimum Order Quantity (Q) on the Production Policies table.
- Period length in days (T).
The calculation is as shown:
where:
PF = Production Frequency
T = period length in days
Q = Minimum Order Quantity
y = 1 if production (A,p,t) > 0
Last modified: Friday June 16, 2023
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