The first step in the restocking process is to create a list of products to be reordered. This is done by selecting

The following example uses product **01c055 **to show how the reorder quantity is determined. The value of the relevant fields in the inventory master file for product **01c055 **are shown below.

Qty on Hand = **200
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**Outstanding Orders = **55
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**Qty Committed = **91
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**Reorder Point = **100
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**Order Quantity = **50
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**To determine the reorder quantity, the stock level is calculated by subtracting the quantity of outstanding sales orders and the quantity committed from the quantity on hand (200 - (55 + 91) = **54**). Since the stock level, **54**, is below the reorder point, **100**, the product should be reordered.

The quantity to reorder is determined by adding the reorder point quantity to the order quantity and subtracting the stock level: (100 + 50) - 54 = **96**. If there are any purchase orders for product **01c055 **that have not been received, these are subtracted from the quantity to be reordered to give the final reorder quantity. In this example there are no pending purchase orders, so the reorder quantity is **96**.

Next, the process searches the vendor price file to find the best price for the reorder quantity. The entries in the vendor price file for product **01c055 **are displayed below.

**Vendor Min. Qty Order Size Price U/M
**

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**h05400 0 1 21.00 5

60 20 20.50 5

120 20 20.00 5

300 50 19.50 5

500 50 19.00 5

s15700 0 1 29.25 1

50 5 29.23 1

Each price listed shows the minimum order size as well as the package or lot size. In other words, if the product is sold in boxes of 20, the reorder quantity must be a multiple of 20 (20, 40, 60, etc.). Before the process can determine if the reorder quantity meets the minimum quantity and order size requirements, it must convert the reorder quantity from product units to vendor units. The value in the **U/M **field tells it how to do this. U/M, or unit of measure, is the ratio of the product units to the vendor units (u/m = product units / vendor units). A U/M value of **5**, as shown above for vendor **h05400**, means that one unit of product **01c055 **sold by vendor **h05400 **is stored as 5 product units in inventory.

In our example, the reorder quantity is **96 **product units. The unit of measure conversion for vendor **h05400 **converts this to **19.2 **vendor units (vendor units = product units / u/m or **96 **/ **5**). Although **19.2 **meets the minimum quantity requirement for the **21.00** price, it is not a multiple of order size **1**. The reorder quantity **19.2** meets neither the minimum quantity nor the order size requirement for any of the other prices listed for vendor **h05400**, which prevents the process from choosing any of these as the "best price".

The vendor **s15700** also has prices listed for product **01c055**. The U/M for vendor **s15700 **is equal to 1. This means that 1 unit of product sold by vendor **s15700 **is stored in inventory as 1 unit. The reorder quantity amount of **96 **meets both the minimum quantity and order size requirements of the 29.25 price. Although it is well above the minimum quantity of **50 **for the 29.23 price, it is not a multiple of order size **5 **which prevents it from qualifying for the 29.23 price. The "best price" (in this example it is also the only price) for **96 **units of product **01c055 **is 29.25 from vendor **s15700**.

The best discounted price is also determined. Although the discounted price is lower per product unit than the "best price", more units have to be ordered so the total price is higher. This is discussed in more detail below.