How to forecast Purchase Orders with ODOO

How to forecast Purchase Orders with ODOO.

Recently one of the companies to which I provide ODOO Management and Financial Control & Functional Consulting services, requested me an interesting challenge, this company had about 300 uncontrolled products.

Products that they had no idea how much they needed to buy to optimize stock and safely cover forecast demand.

To perform the design of this type of tool, the first thing that must be taken into account is what type of information is going to be worked with, in this specific case, we are always going to work with future data, except for the current stock and the entries and reserved outputs in the warehouse, that is, those purchases or sales that are pending arrival or delivery, but are registered in the system.

If you already use ODOO, you will know that when you validate a purchase or sales order, the first thing the system does is prepare the entry or exit movement of the warehouse, that is, it generates the delivery note in preparation or reservation mode.

These movements not yet made, which affect the virtual or planned stock, are ideal for calculating purchasing needs.

Let’s guess that a product has a real stock of 100, reserved inputs of 20 and reserved outputs of 50 during the same month, this means that if we did nothing at the end of the month the final stock would be 70.

But the forecasts are not so simple since other elements come into play. Suppose that for that month the expected demand for the remainder of the month is 120, if this were fulfilled we would not be able to supply customers since the final stock would be negative, in this case -50.

Therefore, you have to buy, but to know how much you have to buy, you have to take into account the supplier’s lead time to ensure that we are going to receive the products on time to be able to supply customers within the commitment schedule, we should also provide of a minimum safety stock that would cover the expected daily demand multiplied by the supplier’s lead time.

In other words, if the forecast demand is 5 and the supplier’s lead time is 10 days, our safety stock for this product would be 50.

This means that the final stock should never be less than the minimum stock of 50, but since is also intended is to optimize the stock, then we will buy the necessary quantity not only to cover the forecast monthly demand but also the final stock is at least equal to safety stock.

In this way, taking into account all these variables, we can have a predicted amount with more or less accuracy of how much should be purchased each month.

The data can be updated with a certain frequency, either every week, every 15 days or every month to adjust the expected amounts of purchases.

Then there is the experience of the purchasing manager to be able to adjust the variables and finally decide what quantities to buy, but at least he already has a reference to base himself on.

As a result of the implementation of this tool, the company is optimizing its stock, it is not buying blindly, and therefore it is saving money, more space in the warehouse and obtaining more cash.

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