By Jon Schreibfeder
It is imperative that you calculate or manually maintain order cycles (or review cycles) that are not too long or too short. We recommend that you maintain order cycles between 4 and 30 days for primary vendors. This will facilitate more efficient warehouse and back office operations. Learn more about inventory management.
Suppose a vendor has no minimum order requirement. You could place individual replenishment orders for single products all day long. But, this is not practical because of the volume of small receipts that your receiving and accounts payable departments would have to deal with.
But what happens if you only generate enough demand to place an order with the vendor every two or three months. Problem:
- It can harm customer service
- It will increase your costs and inventory investment.
- You are gambling that demand will follow your forecasts.
- You are betting that the cost will not decrease before you can sell the large quantity you purchased.