navision logistics handbook step 5_2.2

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Logistics Processes and IT tools of 53 Navision master version

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Navision Handbook

Step 5 Sales Space Management Version 2.2

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This document is developed and produced through collaboration between Inter IKEA Systems B.V. and K3 Business Solutions B.V. The content of this material is owned and updated by Inter IKEA Systems B.V in collaboration with K3 Business Solutions B.V.

Inter IKEA Systems B.V IKEA Concept and IKEA Business Processes

Final document containing a description of operating IKEA business process in Navision Master Version

Documentation of technical work steps in Navision Master Version in a number of manuals

Documentation of IKEA business process operations in a number of manuals

K3 Business Solutions B.V Navision Master Version

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Revision information Edition Date Comment Author Verified Approved 1.0 17.10.2011 The document was

published K3

2.0 11.07.2013 Restructured, Screen shots updated Processes included Graphics included, Service Pack 38 changes included

Holger Peters (HLGP)

Ron Tuk (RONT)

Michael Baron (BARO)

2.1 22.04.2014 Updates SP 43 and 44 Individual and Add-On Filling Rate included

Holger Peters

Ron Tuk Michael Baron

2.2

30.03.2015 Updates SP51 included

Ivaylo Hristov

Ron Tuk Holger Peters

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Table of Contents Revision information .................................................................................... 3 5. Sales space management ................................................................. 5

5.1. Introduction .......................................................................................................... 5 5.1.1. Background ........................................................................................................... 5 5.1.2. Definition of terminology ........................................................................................ 6 5.2. Preplanning and setup ............................................................................................ 6 5.2.1. IKEA Setup ........................................................................................................... 7 5.2.1.1. Economical Order Quantities ................................................................................... 7 5.2.1.2. Max Safety Stock Factor ......................................................................................... 8 5.2.2. Sales Method Setup ............................................................................................... 9 5.2.2.1. Min Qty Weeks ...................................................................................................... 9 5.2.2.2. Max Sasp Qty Weeks .............................................................................................. 9 5.2.2.3. Max Buffer .......................................................................................................... 10 5.2.2.4. Calculate Auto Bin ............................................................................................... 11 5.2.3. Replenishment Level ............................................................................................ 12 5.2.3.1. Calculated Replenishment Level ............................................................................. 13 5.2.3.2. Adjusted Replenishment Level ............................................................................... 15 5.2.3.3. Default Replenishment Level ................................................................................. 17 5.2.3.4. Sales Space Type................................................................................................. 18 5.2.3.4.1. Non flexible sales space ........................................................................................ 19 5.2.3.4.2. Flexible sales space .............................................................................................. 19 5.2.3.5. Overview recommended values ............................................................................. 21 5.3. Sales space management of new articles ................................................................ 22 5.4. Maintain sales spaces of selling articles .................................................................. 22 5.4.1. Managing sales spaces ......................................................................................... 22 5.4.2. Defining Sales Space Size ..................................................................................... 22 5.4.3. Safety Stock Calculations ...................................................................................... 28 5.4.3.1. Mathematical Safety Stock .................................................................................... 28 5.4.3.2. Auto Bin ............................................................................................................. 29 5.4.3.3. Maximum Safety Stock ......................................................................................... 29 5.4.3.4. Minimum Safety Stock .......................................................................................... 29 5.4.3.5. Lowest Sales Quantity .......................................................................................... 30 5.4.4. Product Dominance .............................................................................................. 31 5.4.5. Maximum Delivery Quantity .................................................................................. 32 5.4.6. Local PQ and MPQ ................................................................................................ 33 5.5. Range allocation in the warehouse ......................................................................... 34 5.6. Follow up ............................................................................................................ 36 5.6.1. Store report “Maintain Sales Space, Summary” ....................................................... 36 5.6.2. Store report “Suggestion, Sales Space cap.” ........................................................... 38 5.7. Meetings activities connected to sales space management ........................................ 40 5.8. Performance indicators connected to sales space management .................................. 41 Appendix I – Calculation and Formulas ................................................................................. 42 A.1. Safety stock ........................................................................................................ 42 A.2. Sales Space size .................................................................................................. 44 A.3. EOQ calculation ................................................................................................... 48 A.4. Need calculation for internal replenishment ............................................................. 49 A.5. Replenishment Level ............................................................................................ 51

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5. Sales space management

5.1. Introduction

5.1.1. Background

Sales space management ensures that all sales spaces are properly dimensioned so that they can accommodate incoming deliveries and are stocked with volumes based on sales forecast. Two of the biggest success factors are making best use of flexible sales spaces and optimizing the filling rate. Managing sales spaces is an ongoing task because of constant changes in range presentation and sales pattern. The objective of sales space management is to maximize sales and minimize costs. In order to maximize sales the sales space size must be dimensioned in such a way that the customers are always able to buy the product they require. In order to minimize costs the sales space size needs to accommodate the incoming delivery quantities and the safety stock, which will optimize the door-to-floor goods flow.

The overall responsibility for sales spaces lies with Sales. Sales is supported by ComIn and In-store Logistics. In-store Logistics is supporting with dimensioning of the sales spaces, identifying sales spaces that do not have products available the whole day with Navision. The system has all needed information to predict the stock level in the store. Based on this information it is possible to suggest the optimum sales space size. The sales space is an essential part of the IKEA supply chain since this is where the article meets

the customer. It is also important for the need calculation, as the sales space size is a part of the ordering process. Navision defines the sales space size with help of different algorithms which give four different sales space quantity limits: Min, MinDir, Suggestion and Max. These sales space quantity limits are the borders between the different goods flow classifications: Missing, Too Small, Indirect, Direct and Too Big. The sales space quantity limits are set according to an optimal on the incoming quantity and the average sales of an article. However, a main influence is coming

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from the three main parameters which are controlling our ordering; MIN_QTY_WEEKS, MAX_SASP_QTY_WEEKS and MAX_BUFFER. Those parameters, if set correctly, will ensure that Navision can provide the correct information for dimensioning the sales spaces to achieve the overall goals.

5.1.2. Definition of terminology

Sales space management is about dimensioning sales spaces efficiently by taking into consideration critical elements like commercial needs, range size, sales expectations, available space and incoming deliveries. It is a condition for selling large volumes at low costs. A sales space consists of three main elements: Sales space, Range presentation and Product dominance.

A sales space consists of the safety stock and the in-delivery quantity which will be picked up by the customer and replenished by Logistics. Safety stock should cover deviations of the sales pattern compared to actual sales and deviations of lead time and therefore secure availability.

5.2. Preplanning and setup Before sales spaces can be maintained on a regular - weekly and daily – basis, some parameters need to be defined and set up in Navision. This needs to be done in Setup/IKEA Set Up and Setup/Sales Methods. This will be described in the following chapters. To secure the optimal sales space management all sales spaces need to be set up according to the actual naming convention and daily and weekly indices need to be updated.

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5.2.1. IKEA Setup

5.2.1.1. Economical Order Quantities

Economical Order Quantities (EOQ) is the system which calculates the right amount to be purchased to have enough stock for sales and to replenish the sales space in the most efficient way. To ensure a good working sales space management the “EOQ Round %: should be set to 70. That means if the order quantity is 70% or more of a pallet quantity it will be rounded up to a full pallet to avoid picking in the DC. A value higher than 70% is not useful as the Supply Chain has an equivalent parameter set to a value of 70%. A lower value means that Navision starts earlier rounding up to full pallet orders, therewith decreasing the cost of picking at the DC. The usage of the EOQ calculation needs to be activated by ticking the box “Use EOQ”.

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5.2.1.2. Max Safety Stock Factor

Safety stock is part of the sales space. The Max Safety Stock Factor is used in the calculation of the used safety stock and in sales space management. With this setup an upper limit of the used safety stock can be defined. Recommended value is 10.00. This means the maximum possible safety stock in the sales space can be 10 times AWS if required. This results in a maximum of 10 weeks of safety stock.

In order to avoid overstock in the sales spaces the Max Safety Stock Factor (10) plus Max Sasp Qty Weeks (4) should not be greater than 15 weeks. 10 + 4 = 14 < 15 Otherwise this article will have the Goods flow classification as “Too Big”. The KPI “Overstock” within IKEA is defined as the stock value of an article which is 15 times AWS or more. (see also 5.2.2.2)

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5.2.2. Sales Method Setup

5.2.2.1. Min Qty Weeks

The Min Qty Weeks is the minimum order quantity in weeks that will be ordered if the sales space size is dimensioned big enough to fit the in-delivered quantity, in other words: when the sales space is classified as “Direct” or “Too Big”. The Min Qty Weeks determines the minimum order quantity on Sales Method. The minimum quantity ordered will be either one pallet quantity or, for multipacks, the Min Qty Weeks times the AWS, rounded up to the next multipack. The recommended value is 2.00. This means that the DC has to pick once every two weeks only. Also the replenishment is done every two weeks. This keeps the cost within the IKEA supply chain low. This minimum order quantity will be taken into consideration to dimension and propose the sales space size. The result of this calculation is MinDir (see 5.4.2).

It can be defined under Setup/Sales Method.

5.2.2.2. Max Sasp Qty Weeks

The parameter Max Sasp Qty Weeks is used to calculate the Max value. The defined sales space size for the majority of the articles should not be higher than Max. Otherwise those articles will have the goods flow classification of “Too big”. The recommended value is 4. In order to avoid overstock in the sales spaces the Max Safety Stock Factor (10) plus Max Sasp Qty Weeks (4) should not be greater than 15 weeks. 10 + 4 = 14 < 15

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Otherwise this sales space would be classified as “Too big” (see also 5.2.1.2). For Full serve, due to the low AWS of most of the articles, Max Sasp Qty Weeks can be increased to improve efficiency within the supply chain and internal replenishment. This decision needs to be balanced out with potential overstock in the sales spaces.

5.2.2.3. Max Buffer

The Max Buffer is the order quantity in weeks that will be ordered if the sales space size is not dimensioned big enough to fit the in-delivered quantity, in other words: when the sales space is classified as “Missing”, “Indirect” or “Too small”. The quantity ordered will be either one pallet quantity or, for multipacks, up to Max Buffer times the AWS. This will reduce the picking at the DC for an article that will anyhow be picked in the store due to its small sales space. Recommended value is 4.00. The in-delivered quantity will not fit in the sales space. The stock which cannot be replenished in the sales space or neighbourhood locations will be back flow and need to be put into buffer. This backflow is accepted and part of the normal goods flow process.

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5.2.2.4. Calculate Auto Bin

The auto bin effect is the safety stock needed, when a sales space in the Market hall has to be bigger than the normal standard (Mathematical Safety Stock + Max Sasp Qty Weeks). This is done in order to promote sales by having a higher stock level in the sales space and to create an attractive facing for the customer. The auto bin should only be used in Market hall for commercial reasons to show volume in the sales spaces (e.g. soft toys).

The Auto Bin is limited by the max safety stock factor. A sales space should not have more than 15 weeks of stock (= over stock) in total. If auto bin is activated, the quantity needed is calculated as soon as the sales space size is changed for every article taking into account the new sales forecast.

Safety Stock

Auto-Bin = Safety Stock

Increase

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5.2.3. Replenishment Level

The Replenishment level is used for replenishment of sales spaces. There are three different types of replenishment levels available:

• Calculated Replenishment Level percentage (calculated %) • Adjusted Replenishment Level percentage (adjusted %) • Default Replenishment Level percentage (default %)

Navision will always use the Calculated % in case no Adjusted % is set. Default Replenishment Level % will only be used in case the article has an assigned sales method, that is not equal to the three default ones – S, M, F. The used Replenishment Level is indicated by a red marker “l”.

In order for the user to have an easy overview on what is the exact limit when replenishment will be triggered, a Replenishment Point (in unit of measure) is also calculated. This is done by multiplying the used Replenishment Level percentage to the Total Sales Space Size and adding the Product Dominance quantity. When the actual stock in the picking bin is equal to or below this level, Navision detects a Need for replenishment.

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All relevant formulas can be found in Appendix I.

5.2.3.1. Calculated Replenishment Level In order to secure commercial sales spaces at low operational costs, avoid local-local shortages and support high on-shelf availability, Navision automatically calculates an optimal Calculated Replenishment Level for each article. The following parameters are used for this calculation:

• Sales Method Default Filling Rate percentage • Multipack Qty and Pallet Qty • Flex factor • Autobin • Minimum Safety Stock • Lowest Sales Quantity • Forecast of next opening day

The Calculated Replenishment Level in unit of measure (pieces or meters) is then divided by the Total Sales Space Size. The result is called Calculated Replenishment Level percentage.

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As all sales methods are based on specific business rules, Navision is applying different calculations in order to meet the priorities for each one. Therefore the logic of Calculated Replenishment Level is based on the SM value (0, 1 or 2). In order to secure availability, operational efficiency and commerciality for Markethall and Self Serve areas (Sales Methods 1 and 0), Navision is calculating in the background the following three sub-Replenishment Levels:

• Minimum Internal Replenishment Level • Maximum Internal Replenishment Level • Commercial Internal Replenishment Level

Minimum Internal Replenishment Level secures the availability in the picking location for the next day by considering the Minimum Safety Stock and Lowest Sales Quantity (see 5.4.3), and the forecast for the next opening day. As the Minimum Safety Stock can be manually adjusted by the user, a misuse of the parameter can lead to an inefficient result of the calculation. Maximum Internal Replenishment Level supports the goods flow efficiency by securing that a minimum of one full multipack is always replenished and thus backflow is minimized. As suggested by the name, Commercial Internal Replenishment Level aims to secure commerciality of the sales locations, based on the Default Filling Rate percentage set for the Sales Method or the Auto Bin value. Availability in the sales locations is not a priority for Sales Method 2 (Full-Serve), as replenishment can be done during opening hours. Since customers don’t have access to these articles, there is no need to focus on commerciality either. That is why Calculated Replenishment Level for Full-Serve is supporting only efficiency,

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by securing that the maximum number of full multipacks can be replenished. This helps keep the handlings per cubic meter low. As handling of full pallets

The relevant formulas can be found in Appendix I.

5.2.3.2. Adjusted Replenishment Level

The Calculated Replenishment Level is an optimal result, supporting availability, efficiency or commerciality, Calculated Replenishment Level percentage should be used as frequent as possible. However it can still be manually overwritten for exceptional cases by manually setting a percentage value in the column Adjusted Replenishment Level % in InStore Logistics/Periodic Activities/Sales Space Capacity Adjustment (the default value is 0).

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If there is an Adjusted Replenishment Level percentage set for an article, it automatically becomes the used replenishment level percentage.

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5.2.3.3. Default Replenishment Level

The Default Replenishment Level percentage is equal to the default value set for the Sales Method. It is a reflection of the decision of the store Commercial Team regarding the targeted replenishment level that balances between high commerciality and efficiency.

The Default Replenishment Level percentage is only a base of the calculation of Commercial Replenishment Level and thus secures and optimal result for each article. It will never be the used Replenishment Level in case the article has a standard SM (M, S and F) assigned.

The Default Replenishment Level of a Sales Method can be changed under Setup/Sales Method per Sales Method. The recommended values for a standard store are SM 0: 50%, SM 1: 40%, SM 2: 25%.

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5.2.3.4. Sales Space Type

The sales space type defines if the sales space is “flexible” or “non flexible”. The sales space type is a default that will be used if a new article will be created in the item master. The options are “Non Flexible” or “Flexible”. The articles in Market hall should always be flexible. The sales space type need to be defined in Setup/Sales Method per SM.

In case the Sales Space Type for a running article needs to be changed this needs to be done in the Sales Space Size Adjustment Table or the Item Card.

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5.2.3.4.1. Non flexible sales space

IKEA stores have non flexible sales spaces in SM 1 and SM 2. Non flexible sales spaces will be dimensioned for safety stock plus in-delivery quantity. This is the maximum stock for the article. Every non flexible article has its own space which is not shared with any other article. If the stock sells down until the next in-delivery arrives the location will not be 100% full. Having non flexible sales spaces will lead to an overall empty looking Market hall.

5.2.3.4.2. Flexible sales space

The flexible sales space concept was implemented to secure a commercial, full looking Market hall. The general idea is that articles which are located next to each other share the space for their sales spaces. This will increase the commercial filling rate and will increase efficiency.

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Flexible sales spaces will be dimensioned for average stock, being equal to Safety stock plus half of the in-delivery quantity. The other half of the in-delivery quantity will be accommodated in the neighborhood spaces.

Nothing will change when it comes to the stock level over time. At any time some articles will be closer to maximum and some will be closer to minimum. The articles with in-delivery must use the space made available by the article being near minimum.

The graph above shows the sales pattern of an article between maximum stock and minimum stock. The idea is that more than one article share space to achieve an overall higher filling rate regardless if one article is sold down. The available space of an article which is sold down will be used by an in-delivery quantity of

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another article located close by. The sales space size for flexible articles will be the average stock, for non-flexible it would be maximum stock.

Non flexible sales space Flexible sales space Flexibility supports better sales space allocation and will enable that more products can fit in the same sales space. They are more commercial and look always full because the filling rate is overall higher. Flexible sales spaces are more efficient as they reduce backflow.

5.2.3.5. Overview recommended values

Parameter SM 0 SM 1 SM 2

Max Safety Stock factor 10.00 MinQtyWeeks 2.00 2.00 2.00 MaxSaspQtyWeeks 4.00 4.00 4.00 - 9.00 MaxBuffer 4.00 4.00 4.00 Calculate Auto Bin Yes No No Default Replenishment Level 50% 40% 25% Sales Space Type Flexible Non flexible Non flexible Flex Factor 40 Full Pallet Direct Share % 85 EOQ Round %: 70

The above recommended values are meant for stores with sufficient m2 in Market hall, Self-serve and Full Serve. Stores with over or under capacity can deviate from the recommendations.

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5.3. Sales space management of new articles The initial forecast of an article needs to be set in order for Navision to support the sales space dimensioning. Once this field has been populated, Navision will calculate the sales space quantity limits Min, MinDir, Suggestion and Max. Sales in the store, supported by Sales & Supply Support, has to update the agreed sales space size in Navision. The goal is to set the sales space size as close as possible to the "Suggestion" provided by Navision. As a minimum requirement every store should have the 20% top selling articles set as “Suggestion”, 65% of medium selling articles as ‘Direct’ and the remaining (15%) as ‘Indirect’. This will lead in minimum 85% Direct flow for Market hall.

5.4. Maintain sales spaces of selling articles

5.4.1. Managing sales spaces

The sales space of an article should not be considered as static. It needs to be maintained and adjusted over time in accordance with the sales pattern. By setting the sales space size as close as possible to the "Suggestion" given by Navision, one ensures that the goods flow classification will remain “Direct” even if the sales pattern fluctuates over time. As a result, the door-to-floor percentage will be as high as possible with a minimum of maintenance. The sales spaces of the top 20% articles should be planned as ‘Suggested’. The share of articles which need to be ‘Indirect’ should be the lowest selling articles.

5.4.2. Defining Sales Space Size

The sales space size is part of the sales space where the customer picks the article for take away. The sales space size contains the in-delivery quantity and the safety stock. The sales space size should always consider the actual available physical space on the shop floor. It should never be bigger than the available space because this will create backflow. It should also not be smaller as this will leave empty space which is not commercial.

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The sales space size can be given for picking and if applicable for add on space as well. The sales space size is the sum of these sizes. The sales space size is used to calculate how many pieces the picking bin can hold. Sales space size can be changed via Item and then Sales Space Management, or press Alt + F9

In the above screen the sales space size is 27 which is equal to the MinDir of 27. This means the Goods Flow Classification for this artilce is ‘Direct’.

In this example above the sales space size is below MinDir but above Min. This sales space is ‘Indirect’. The classification is not “Direct” because the Sales Space Size is smaller than MinDir. It is not “Too Small” because it is greater than Min.

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This sales space is classified as ‘Too small’ as its size is below Min. Other information which can be seen in the tab SSM is

• Sales Space Type (the article is defined as “flexible” or “non flexible”) • Goods Flow Classification • Total Sales space size (includes Add-on Space Size, does not include Flex

Capacity) • Add-on Space Size • Flex Capacity • Product Dominance quantity • Replenishment Level (in percentage) and Replenishment Point (in UoM) • Central and Local Multipack and Pallet Quantity (see 5.4.6) • Minimum sales space to be “indirect” • Minimum sales space to be “direct” • Maximum sales space • Suggestion • Five available types of safety stock: Auto Bin, Mathematical Safety Stock,

Maximum Safety Stock, Minimum Safety Stock and Lowest Sales Quantity. The red mark in front of one of those five shows which one is in use.

• Average weekly sales • Time and Date of the last update

The field Sales Space Size has a drill down menu which will enable to amend the sales space size and to add or delete Add On locations. After clicking the arrow, a window with a list of all bins and quantities will appear. There should always be one – and only one - Picking Bin and as many Add-on bins as there are in the store for this article.

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Every Add-on location should be registered individually. The Picking location is the home location of this product. Navision will sum up the sales space sizes of all Add-on locations plus the Picking location. This will be the Total Sales Space Size which is used for the calculation of the need (See Appendix I).

In addition to the tab SSM a second tab EOQ can be found. This tab enables the

user to see the result of the Navision calculation of the EOQ orders for the sales

space according to the set parameters in the Setup/SalesMethod:

• Minimum Order Quantity

Result for minimum order quantity according to set parameter MinQtyWeeks.

• Maximum Order Quantity

Result for maximum possible order quantity according to set parameter

MaxSaspQtyWeeks.

• Maximum Buffer

Result for order for indirect articles according to set parameter MaxBuffer.

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In addition the following parameters can be also found: • Full Pallet Mark - if set to “P” Navision or DSP/FF will always order a full pallet.

If set to “M” the article can be ordered picked.

• Delivery Type – indication if the article can be picked or delivered on full

pallets based on the supply setup rules.

• Maximum Delivery Quantity – the number of pallets that can be ordered as

“flex range” (see 5.4.5)

• Certainty factor - is equal to used Safety stock / EWS. This information is

provided to the supply chain, DSP/FF, and is not used in the stores.

• Local Multipack Quantity (see 5.4.6)

• Local Pallet Quantity (see 5.4.6)

The sales space size can also be adjusted via Periodic activities/Sales Space Size Adjustment.

In addition to the sales space size the Product Dominance and the Sales Space

Type can be adjusted here. Please not that the default Sales Space Type, which is

defined in the Sales Method Setup is valid for new articles only. In case a user

changes the default value in this setup the Type will not change for the articles,

which are already in Navision. In case a later change is required this can be done

in the Sales Space Size Adjustment table or the Retail Item card.

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The field Full Pallet Mark is set manually. The Full Pallet Mark is used to define that full pallets will be ordered only. If one is set to “P” then full pallets only will be ordered. The value “M” stands for Multi Pack Quantities.

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5.4.3. Safety Stock Calculations

Navision has five different types of safety stock: Mathematical Safety Stock, Auto Bin, Maximum Safety Stock, Minimum Safety Stock, and Lowest Sales Quantity. The red mark indicates which of the five is active and actually used by Navision. The prioritisation rules and formulas for all safety stock calculations can be found in Appendix I.

5.4.3.1. Mathematical Safety Stock

The Mathematical Safety Stock is used to cover for uncertainties in the supply chain and in the buying behaviour of customers. Its purpose is to secure availability in the store even if things do not go according to plan. This is the most commonly used safety stock calculation based on Service Level Classification, Lead time and Lead time variation, sales and sales variation. This calculation is used if its result is bigger than Minimum Safety Stock, Lowest Sales Quantity or Auto Bin, but smaller than Maximum Safety Stock

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5.4.3.2. Auto Bin

The purpose of the Auto bin is to secure a commercial amount of stock holding in sales spaces, not to secure availability. Auto Bin is the automatically calculated Bin effect to secure a commercial stock holding in a sales space. This calculation must secure the filling rate of all sales spaces, whatever their size. This calculation is used as safety stock if its result is bigger than Mathematical Safety Stock, Lowest Sales Quantity or Minimum Safety Stock, but smaller than Maximum Safety Stock. It is controlled on sales method level. It needs to be defined in Setup/Sales Method per Sales Method if the system should calculate an Auto Bin.

5.4.3.3. Maximum Safety Stock

This is the upper limit in pieces for the safety stock calculation. The used safety stock will never be higher than the Maximum Safety Stock, except when the Minimum Safety Stock or Lowest Sales Quantityare higher. The Maximum Safety Stock Factor is set in the Setup/IKEA setup.

5.4.3.4. Minimum Safety Stock

The Minimum Safety Stock (MinSS) can be set manually to secure a minimum amount of stock in the sales space. The default value is 2. It is the Sales Leader’s role to define a Minimum Sales Quantity (default = 2) which he or she hands over to the Supply Support Specialist within RSI that defines the Minimum Safety Stock. The default of 2 is based on the consideration that 1 piece will remain for sell if one item is lost or damaged.

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The articles that need to be revised in any case are:

- Articles that are occasionally sold as multiples and Lowest Sales Quantity does not cover that need should have a higher MinSS as they should satisfy at least 1 customer’s need (e.g. kitchen fronts, dining chairs, hard floors, kitchen rails)

- Articles with inventory issues – often lost or unsellable quantities Low-sellers that tend to be damaged

5.4.3.5. Lowest Sales Quantity

Lowest Sales Quantity reflects the average quantity of an article that one customer purchases per receipt, taking into account some deviation from the calculated average. This safety stock fulfils the purpose to hold a minimum amount of stock for one single customer even if the AWS for this article might be very low. This could happen with products like dining chairs or kitchen doors. The AWS of a particular chair could be as low as 0.1. However if a customer wants to buy a dining chair he or she will buy 4.

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5.4.4. Product Dominance

The Product Dominance is the upper part of the sales space and is not part of the sales space size. Product Dominance helps visitors to orientate, find products and reinforces the low-price profile. This level shall always be fully stocked and must not be part of the sales space size. Therefore it needs to be registered correctly otherwise the sales space could be empty. It is only used for Sales Method 0 (Market hall) articles.

The Product Dominance can be updated in the Sales Space Size Adjustment table in column Product Dominance.

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5.4.5. Maximum Delivery Quantity

Note: The Maximum Delivery Quantity is only available for stores connected to the DSP/Fulfillment! The Maximum Delivery Quantity indicates how many pallets the store can receive extra for an item, earlier than planned/calculated. Items that are normally ordered in pallets are part of this so called “flex range” and sell multiple pallets a week. Only those should have a figure greater than zero in this field.

To change this value the Sales Space Size Adjustment form should be used.

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5.4.6. Local PQ and MPQ

Local multipack quantities and local pallet quantities can be set on article level in the Sales Space Size Adjustment table.

The store users can rectify incorrect central values, to secure that the real MPQ and PQ quantities are reflected in the values in Navision which are used for internal replenishment. This will reduce handlings in the store as the internal order process will consider the real values instead of the false central ones. For articles, with the same multipack quantity as pallet quantity, like articles with distribution method DD, a local MPQ can be set. If the local MPQ is smaller than the PQ, Navision will be able to replenish this smaller MPQ instead of the PQ. This supports Sales Space Management and reduces back flow and internal handlings. Setting too many local MPQ and ordering internally more MPQ instead of PQ can increase the internal handlings. Please note that for replenishment from the external warehouse the local PQ, if set, will be taken into consideration, not the central or local MPQ.

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5.5. Range allocation in the warehouse

5.5.1. Range split between Self-serve furniture area and Full Serve

For the range allocation in the warehouse some specifics need to be considered which are different compared to range allocation in Market hall. The furniture range needs to be allocated either in Self-serve or Full Serve. Top selling article should be sold via Self-serve. The related KPI’s to measure this correct allocation are “volume sold pieces” and “sold volume”. Minimum 80% of the sold pieces should be sold via Self-serve. This ensures instant gratification for the customer but also efficiency in the store to keep the prices as low as possible.

5.5.2. Self-serve

If the range is split between SS and FS it needs to be grouped. In SS the customer buying process needs to be considered. HFB and product families will be usually kept together. High selling articles need to be allocated close to the main aisle. This will help the customer to find their products easier and quicker and will reduce distances for goods flow replenishment. High selling products at the end podia indicate towards the customer which type of product they can find in which aisles and support big enough sales spaces for high volume articles.

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5.5.3. Full Serve

In Full Serve the picking process needs to be considered. Articles and families with higher picked frequency should be allocated closer to the merchandise hand out to keep picking and waiting time for the customer low.

Families should be grouped together to allow for efficient picking process. The range split and allocation need to be revised with every PCD split.

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5.6. Follow up

It is essential to evaluate the sales space sizes per article on a weekly basis. There are two reports in Navision to assist the user to maintain the sales spaces:

• “Maintain sales space, summary” • “Sales space size, Suggestion”.

The responsibility to follow up on sales space sizes lies within the sales department. The maintenance with the Navision report should be done on a weekly level.

5.6.1. Store report “Maintain Sales Space, Summary”

The ‘Maintain Sales Space, Summary’ report will give an overview on how the different Product Areas (PA), Range Area (RA) and Home Furnishing Businesses (HFB) are performing regarding correct dimensioned sales spaces. It shows the percentage of ‘direct’ and ‘indirect’ and in each goods flow classification. It will state the number of articles that are involved, and the percentage.

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Missing Goods Flow Classification for articles without sales space size registered. This must be corrected as soon as possible as the automated replenishment will never replenish these sales spaces. Too small Goods Flow Classification for articles with a sales space size smaller than the MIN quantity. Those products are at risk that they will sell out during trading hours. Indirect Goods Flow Classification for articles with a sales space size between the MIN quantity and the MIN DIR quantity. For these articles the availability is secured but goods flow is not cost efficient. Direct Goods Flow Classification for articles with a sales space size between the MIN DIR quantity and the MAX quantity. As well availability as efficient goods flow are secured. Too big Goods Flow Classification for articles with a sales space size bigger than the MAX quantity. The automated ordering system cannot keep this sales place full. The space can be used to improve the sales spaces of other articles. At the last page a summary on Sales Method can be found.

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5.6.2. Store report “Suggestion, Sales Space cap.”

After analyzing the Sales Space Summary the report “Suggestion, Sales Space cap.” can be used to analyze in more detail, on article level. It should be used by the sales co-worker to analyse specific articles which are not meeting the required criteria. It is possible to filter on the different Goods Flow Classifications according to the needs.

Max Min direct Suggestion Min 0 Sales Space qty limits

Too Big Too Small

Direct Missing Indirect

Report classifications Indirect Direct

Goods flow classifications

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All detail information is available on this report. The Sales space size capacity report shows article details.

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5.7. Meetings activities connected to sales space management

The entire Commercial Team is involved in sales space management and has a role to play. The task, responsibilities and also the meeting structure need to be agreed in an Internal Service Agreement. The Internal Service Agreement needs to be reviewed and amended minimum once per year before the catalogue drop.

WHAT WHO WHEN

Follow-up sales space sizes: Backflow analysis

Goods flow and Sales Daily

Follow-up sales space sizes: Maintain Sales Space

Sales Weekly

Walk the sales floor Commercial Team Weekly

Follow up on KPIs regarding SSM Sales Weekly

Flexible sales space training Replenishment, Sales and Com&In

Tertially

Ready to Sell packaging update Commercial Team Tertially

Internal Service Agreement Commercial Team Yearly

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5.8. Performance indicators connected to sales space management

SM 0 SM 1 SM 2

Direct flow >= 85% >= 70%

Direct Flow Top 100 = 100% >= 80%

Average max density (m3/m2)

>= 0.29 n/a n/a

Internal handling <= 0.8 <= 1.0

Local local shortage <= 0.1 <= 2.0

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Appendix I – Calculation and Formulas

A.1. Safety stock Mathematical safety stock =

Calculation: K-factor * SQRT((Lead Time * (1.25 * Forecast Error))² + (Expected Weekly Sales² * Lead Time Variation²)

Auto Bin =

Calculation Non-flexible: Sales Space Size – Minimum of (Maximum of (Max SASP Qty Weeks * Average Weekly Sales and Multipack) and Pallet Qty) Calculation Flexible: Sales Space Size – Minimum of (Maximum of (Max SASP Qty Weeks * Average Weekly Sales/2 and Multipack) and Pallet Qty/2)

Minimum Safety Stock =

Manually set, default value = 2

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Maximum Safety Stock =

Max Safety Stock Factor * Average Weekly Sales

Lowest Sales Quantity =

Average_sales_receipt + 1.25 * Mean absolute deviation of the sales receipt

Used Safety Stock =

Calculation: Safety Stock1 = Max (Mathematical Safety Stock, Autobin) Safety Stock2= Min (Safety Stock1, Maximum Safety Stock) Safety Stock3 = Max (Min Safety Stock, Lowest Sales Quantity) Used Safety Stock = Max (Safety Stock2 , Safety Stock3) Example: Mathematical Safety Stock = 231 Auto Bin = 320 Minimum Safety Stock = 2 Maximum Safety Stock = 612 Lowest Sales Quantity = 3 Safety Stock1 = Max (231, 320) =320 Safety Stock2 = Min (320, 612) = 320 Safety Stock3 = Max (2, 3) = 3 Used Safety Stock = Max (320, 3) = 320

*All results are rounded up to Unit of Measure

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A.2. Sales Space size Min =

Calculation Non-flexible: Min = Average Weekly Sales If Min > 2 * Pallet Qty => Min = Average Weekly Sales / 2 [Rounded up to Unit of Measure] Example Non-flexible: AWS = 102,4; Pallet Qty = 40; MPQ = 40 Min = 102,4 102,4 > 2 * 40 = 80 ? Yes => Min = AWS/2 = 51,2 Rounded up to pieces => Min= 52 Calculation Flexible: Min = Average Weekly Sales / 2 If Min > 2 * Pallet Qty => Min = Average Weekly Sales/4 [Rounded up to Unit of Measure] Example Flexible: Min = 102,4/2 = 51,2 51,2 > 2 * 40 = 80 ? No Rounded up to pieces => Min = 52 In this examples the result for Min Flexible and Non-flexible is the same.

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Max =

Calculation Non – flexible: Max SASP Qty Weeks = 4 Max Safety Stock Factor = 10 Average Weekly Sales = 102,4 Max = Max SASP Qty Weeks * Average Weekly Sales [Rounded up to Multipack] + Max Safety Stock Factor * Average Weekly Sales [rounded up to the next UoM] Example Non – flexible: [4 * 102,4] + [10 * 102,4] => 440 + 1024 = 1464 Calculation Flexible: Max = (Max SASP Qty Weeks * Average Weekly Sales) [Rounded up to Multipack] /2 + Max Safety Stock Factor * Average Weekly Sales [rounded up to the next UoM] Example Flexible: [(4 * 102,40]/2 + [10 * 102,4] = 220 + 1024= 1244

Min Dir =

Calculation Non – flexible: Min Dir = (Min QTY Weeks * Average Weekly Sales) [Rounded up to Multipack] + Biggest value of Mathematical Safety Stock and Lowest Sales Quantity If Min Dir > 2 * pallet qty=> Min Dir = Average Weekly Sales / 2 [Rounded up to pallet qty] with a minimum of two pallets If Min Dir < Min => Min Dir = Min Example Non – flexible: Min Qty Weeks = 2 [2 * 102,4] + 25 = [204,8] + 25 => 240 + 25 = 265

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265 > 2 * 40 ? Yes => [102,4/2] = [51,2] = 80 80 < 52 ? No=> 80 Calculation Flexible: Min Dir = (Min QTY Weeks * Average Weekly Sales) [Rounded up to Multipack] / 2 + Biggest value of Mathematical Safety Stock and Lowest Sales Quantity If Min Dir > 2 * pallet qty => Min Dir = Average Weekly Sales / 4 [Rounded up to pallet qty] If Min Dir < Min => Min Dir = Min Example Flexible: [(2 * 102,4)]/2 + 25 => [204,8]/2 + 25 => 240/2 + 25 = 120 + 25 = 145 145 > 2 * 40 ? Yes => [102,4/4] => [25,6] = 40 40 < 52 ? Yes => 52

Suggestion =

Calculation Non – flexible: Suggestion = (Max SASP Qty Weeks + Min QTY Weeks) / 3 * Average Weekly sales + Mathematical Safety Stock [Rounded up to Multipack]

If Suggestion > 2 * pallet qty => Suggestion = Average Weekly Sales / 2 [Rounded up to pallet qty] If Suggestion < 110% * Min Dir => Suggestion = 110% * Min Dir [rounded up to next UoM]

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Example Non – flexible: [(4 + 2) / 3 * 102,4 + 25] = [229,8] = 240 240 > 2 * 40 ? Yes => [102,4/2] = [51,2] = 80 80 < 110% * 80 ? Yes => = [110% * 80] = 88 Calculation Flexible: Suggestion = (Max SASP Qty Weeks + Min QTY Weeks) / 3 * Average Weekly Sales / 2 + Mathematical Safety Stock [Rounded to Multipack]

If Suggestion > 2 * pallet qty => Suggestion = Average Weekly Sales / 4 [Rounded to pallet qty] If Suggestion < 110% * Min Dir => Suggestion = 110% * Min Dir [rounded up to next UoM] Example Flexible: [(4 + 2) / 3 * 102,4 / 2 + 25] = [127,4] = 160 160 > 2 * 40 ? Yes => [102,4 / 4] = [25,6] = 40 40 < 110% * 52 ? Yes => [110% * 52] = 58

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A.3. EOQ calculation

Minimum Order Quantity =

Calculation: MinQtyWeeks * AWS + (Extra Requirement) [rounded to UoM] Example: MinQtyWeeks = 2; AWS = 102,4; MPQ = 40 2 * 102.4 = [204.8] => 200

Max Order Quantity =

Calculation: MaxSaspQtyWeeks * AWS [rounded to UoM] Example: MaxSaspQtyWeeks = 4; AWS = 102,4: MPQ = 40 4 * 102.4 = [409.6] => 400

Max Buffer = Calculation: MaxBuffer * AWS [rounded to UoM] Example: Max Buffer = 4; AWS = 102,4; MPQ = 40

4 * 102.4 = [409.6] => 400

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A.4. Need calculation for internal replenishment

Need identification =

Calculation: Stock – Qty sold not posted – Qty going out + Qty coming in< Total Sales Space Size * Replenishment Level % / 100 + Product Dominance Example: Stock: 100 Product Dominance: 20 Total Sales Space Size: 200 Replenishment Level: 50% Flex factor: 40% Pallet quantity = 300 Qty sold not posted = 0 Qty going out = 0 Qty coming in = 0 100 – 0 – 0 +0 = 100 200 * 50 / 100 + 20 = 120 100 < 120 ? Yes -> need identified

Flex Capacity =

Calculation: If Total Sales Space Size < Pallet Quantity = > Total Sales Space Size * Default Replenishment Level % / 100 If Total Sales Space Size > Pallet Quantity = > Pallet Quantity / 2 Example: Total Sales Space Size = 120 Default Replenishment Level % = 50 Pallet Quantity = 180 120 > 180 ? No => 120 * 50 / 100= 60

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Calculation of the need =

Calculation Non-flexible: Need = Total Sales Space Size – (Stock – Qty Sold Not Posted – Product Dominance – Qty Going out + Qty Coming In) [rounded up to the next Multipack Quantity] Example Non-flexible: Stock: 100 Total Sales Space Size: 200 Multipack Quantity = 20 Product Dominance: 20 Qty sold not posted = 0 Qty going out = 0 Qty coming in = 0 200 – (100 – 0 – 20 – 0 + 0) = 120 Calculation Flexible: Need = Total Sales Space Size + Flex Capacity – (Stock – Sold Not Posted – Product Dominance – Qty Going Out + Qty Coming In) Example Flexible: Stock: 50 Total Sales Space Size: 100 Flex factor: 40% Multipack Quantity = 20 Product Dominance: 20 Qty sold not posted = 0 Qty going out = 0 Qty coming in = 0 100 + 100 * 40% - (50 – 0 – 20 – 0 + 0) = 140 – 30 [rounded up] = 120

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A.5. Replenishment Level Minimum Internal Replenishment Level =

Calculation:

Maximum of (Minimum Safety Stock and Lowest Sales Quantity) + Rounded forecast of next opening day. Example: Minimum Safety Stock = 2 Lowest Sales Quantity = 3 Forecast of next opening day = 7,13 Max (2 and 3) + Round (7,13; 1) = 3 + 7 = 10 pcs

Maximum Internal Replenishment Level =

Calculation: Total Sales Space Size + Flex Capacity – Multipack quantity.

Example: Total Sales Space Capacity = 100 Flex Capacity = 40 Multipack Quantity = 25 100 + 40 – 25 = 115

Commercial Internal Replenishment Level =

Calculation: Total Sales Space Size + Flex Capacity - Rounddown [(Total Sales Space Size + Flex Capacity – Maximum (Auto Bin, Default Replenishment Level % * Total Sales Space Size) ) / Multipack Quantity] * Multipack Quantity

Example: Total Sales Space Capacity = 100 Flex Capacity = 40 Auto Bin = 80 Default Replenishment Level % = 40 Multipack Quantity = 20

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(100 + 40 – (100 + 40 –Max(80, 40% * 100))/20 = (140 – 60)/20 * 20 = 80

Calculated Replenishment Level =

Calculation for Sales Method 0 or 1: Maximum of [Minimum of (Commercial Internal Replenishment Level and Maximum Internal Replenishment Level), Minimum Internal Replenishment Level] If Total Sales Space Size > Pallet quantity => Calculated Replenishment Level = Total Sales Space Size + Flex Capacity – Pallet quantity Example: Commercial Internal Replenishment Level = 60 Maximum Internal Replenishment Level = 115 Minimum Internal Replenishment Level = 22 Total Sales Space Size = 100 Flex Capacity = 40 Pallet Quantity = 250 Multipack Quantity = 25 100 > 250 ? No => Max [Min (60, 115), 22] = 60 Calculation for Sales Method 2: Total Sales Space Size – Rounddown (Total Sales Space Size / Multipack Quantity) * Multipack Quantity If Total Sales Space Size > Pallet quantity => Replenishment Level = Total Sales Space Size- Pallet quantity Example: Total Sales Space Size = 110 Pallet Quantity = 250 Multipack Quantity = 25

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100 > 250 ? No => 110 – Rounddown (110/ 25) * 25 = 10

Calculated Replenishment Level % =

Calculation: Calculated Replenishment Level / Total Sales Space Size * 100 Example: Calculated Replenishment Level = 46 Total Sales Space Size = 200 92 / 200 *100 = 46

Replenishment Point =

Calculation: (Calculated Replenishment Level % * Total Sales Space Size) / 100 + Product Dominance Example: Calculated Replenishment Level % = 52 Total Sales Space Size = 200 Product Dominance = 30 (52 * 200)/ 100 + 30 = 134

navision logistics handbook step 5_2.2

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