In SalesVu, you can set up a feature that automatically generates purchase orders (POs) to streamline inventory management and ensure optimal stock levels. This feature consolidates POs by vendor and runs a background process on a daily or weekly schedule, at a time you specify.
What It Does
This feature helps to maintain inventory by creating POs based on specific thresholds or criteria. You can configure the system to use either the maximum allowed quantity or maximum days of inventory to trigger automatic PO creation.
Configuring Inventory Parameters
Before diving into how purchase orders are automatically generated, it is important to understand how the system calculates when to generate purchase orders. This is based on several key inventory settings, such as Threshold Quantity, Max Stock Days, Storage Capacity and Lead Time which determine when and how much stock should be ordered.
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Threshold Quantity
The Threshold quantity is the minimum stock level that triggers a purchase order. When inventory drops below this level, the system automatically creates a PO to replenish stock and ensure you have enough to meet demand. You can set up this quantity under the Manage Inventory section. Please find more detailed information here -
Max Stock Days
The Max Stock Days setting determines how many days of inventory you want to keep on hand. The system uses this setting to calculate how much inventory is needed to cover your sales for a set number of days, and triggers a PO if your stock is insufficient.- You can set it under the Manage Inventory section > locate the column Max Stock Days > enter a number > click on 'Save All' at the top right corner.
- Storage Capacity field defines the maximum amount of stock that can be stored at your facility or location. This value is crucial for balancing inventory levels and preventing excessive stock accumulation that could lead to storage issues or inefficiencies.
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- You can set it under the Manage Inventory section > locate the column Storage Capacity > enter a number > click on 'Save All' at the top right corner.
Note: in SalesVu, we have the Global Max Stock Days setting, which lets you define the default number of days you want to keep products in stock across your entire inventory. This value will apply to all products unless a specific number of days is set for individual items.
- This can be set up under Manage Inventory > click on the drop-down arrow at the top right > Settings > enter the number in the Global Max Stock Days field
Setting Up Vendor Lead Times
It is also important to set up lead time. Lead time refers to the time it takes for a vendor to deliver stock after an order has been placed. This is essential for accurate PO calculations, as the system needs to account for how long it will take to receive inventory before stock levels become critical.
In the Vendor Management section, you can specify the lead time for each vendor, which will be used when calculating the quantity to order for automatic POs. If no lead time is specified, the system will default to a lead time of 1 day.
How to Enter Lead Time
- Navigate to the Inventory > Vendors section.
- Create a new vendor or click on the drop-down arrow next to the existing one to edit it
- Locate the new Lead Time field for each vendor.
- Enter the delivery time (in days) that the vendor typically takes to fulfill an order.
How to Enable Automatic Purchase Order Creation
Configure Automated PO Rules:
- Go to the "Inventory" > "Manage Inventory" page.
- Click on "PO Automation".
On the PO Automation tab, you will see the following options:
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Do you want to create an automatic PO: Toggle the option to activate automatic purchase order generation.
- Do you want to send consolidated POs for all the locations: If your account manages products across multiple locations, you can choose to consolidate purchase orders by vendor across all your locations. Enabling this option ensures that vendors receive a single, unified PO email that includes orders for all your locations, streamlining communication and simplifying order management.
- Schedule automatic PO creation: Choose the frequency for the PO creation process (daily or weekly) and set the specific time of day for the background process to run.
- What rule you want to use to create automatic POs:
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Based on storage capacity of products: If you select the “Storage Capacity” for each product in your managed inventory, the system will calculate how much quantity needs to be ordered to reach the max allowed quantity when creating POs.
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Based on max stock days of products: If you set the “Max Stock Days” for each product, the system will calculate the PO quantity based on how many days the inventory should last.
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Both Rules Selected: If both rules are selected, the system will calculate the PO quantity using both options and choose the smaller of the two amounts as the final quantity to order.
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Below we will discuss more details on these 2 rules.
- Select Inventory Managers: Under this option, you can specify inventory managers by selecting employees who have inventory management access and location access. In the list of employees, you will see those with the appropriate permissions, and you can select multiple employees to act as inventory managers.
- Do you want to attach a PDF with the PO detail to the vendor email: If you want a PDF version of the PO to be sent as an attachment in the email to the vendor, enable this option.
Choosing and Applying the Two Rules
Let’s imagine you are managing a store with the following settings:
- Threshold Quantity: 10 units (minimum stock to maintain).
- Average Daily Sales: 5 units/day for a product.
- Lead Time: 3 days (the time it takes for a vendor to deliver stock).
Now, you would like the system to create automatic purchase orders using Rule 1 (Max Allowed Quantity) or Rule 2 (Max Days of Inventory), or both.
1. Based on storage capacity of products
This rule ensures the inventory level never exceeds a predefined maximum.
Let's say your settings are as follows:
- Max Allowed Quantity: 50 units (maximum stock you want to keep).
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Condition: If (On Hand Quantity - (Average Daily Sales × Lead Time)) < Threshold,
then a purchase order is triggered. -
Calculation Example:
Suppose you have 20 units on hand.- On Hand Quantity - (Average Daily Sales × Lead Time): 20 - (5 × 3) = 20 - 15 = 5 units.
- Since 5 < Threshold (10 units), a purchase order is triggered.
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Quantity to Order:
Max Allowed Quantity - (On Hand Quantity - (Average Daily Sales × Lead Time)): 50 - (20 - 15) = 50 - 5 = 45 units.
The system creates a purchase order for 45 units to bring the inventory back to the desired level.
2. Based on max stock days of products
This rule ensures the stock will last for a specific number of days, based on daily sales.
Let's say your settings are as follows:
- Max Days of Inventory: 7 days (you want enough stock for 7 days).
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Condition: If (On Hand Quantity - (Average Daily Sales * Lead Time)) < Threshold,
then a purchase order is triggered. -
Calculation Example:
Suppose you have 20 units on hand.- On Hand Quantity - (Average Daily Sales × Lead Time): 20 - (5 × 3) = 20 - 15 = 5 units.
- Since 5 < Threshold (10 units), a purchase order is triggered.
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Quantity to Order:
(Max Days of Inventory × Average Daily Sales) - (On Hand Quantity - (Average Daily Sales × Lead Time)): (7 × 5) - (20 - 15) = 35 - 5 = 30 units.
This means the system creates a purchase order for 30 units to ensure stock lasts for 7 days.
3. When Both Rules Are Selected
If both rules are enabled, the system evaluates the product using both formulas and selects the smaller value to avoid over-ordering.
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Scenario with Both Rules:
- Max Allowed Quantity Rule: Order 40 units.
- Max Days of Inventory Rule: Order 25 units.
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Result:
The system will choose the smaller quantity, 25 units, for the purchase order.
Key Points to Remember
- Threshold Quantity: If no threshold is specified for a product, the system assumes a default of 0.
- Lead Time: If no lead time is provided for a vendor, the system assumes a default of 1 day.
- Comprehensive Coverage: The system applies the same logic for simple products and those with modifiers or components.
This feature ensures your inventory is maintained efficiently and avoids overstocking or understocking scenarios.
Purchase Order Creation and Approval Process
Automated POs are generated in a draft state and require inventory managers to review and approve them before they are sent to vendors.
To view a draft PO, access Inventory > Purchase Orders > filter PO with 'Draft Orders filter > and you will find your PO with the 'automation' label.
You can also filter all your PO to see only automated ones by selecting the 'All' filter > PO Created By Automation
Inventory Manager Approval
Inventory managers are notified about these draft POs via email, which they can review and approve using the following process:
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Notification: The system sends the draft POs to inventory managers, who receive an "Approve Purchase Order" or "Reject Purchase Prder" button along with the draft PO details.
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Approval Action:
- A manager needs to click the "Approve Purchase Order" button directly from the notification or the draft PO page.
- Upon approval, the system changes the PO's status from "Draft" to "Open PO."Note: If the system is unable to retrieve the cost price for any item, the inventory manager will need to edit the draft PO to provide the missing information before it can be sent to the vendor.
- Audit Trail: The system tracks which inventory manager approved the PO and logs their action in the PO comments for reference.
Vendor Approval
The approved PO by an inventory manager is automatically sent to the assigned vendor. Vendors will receive PO emails containing "Approve Purchase Order" and "Reject Purchase Order" buttons. They can use these buttons to accept or reject the POs and also have the option to provide comments explaining the reason for rejection or any additional feedback.
Note: After that, inventory managers will receive notification emails whenever vendors accept or reject POs or leave comments.
Purchase Order Management
On the Purchase Orders page, you will have the option to select multiple draft POs and send them all to the respective vendors in one go. These POs will be automatically consolidated into a single email.
You will be able to attach the purchasing agreement to the vendor profile, and it will be included in PO emails sent to the vendor. For that, follow the steps:
- Access Inventory > Vendors tab
- Attach a PDF file in the field Current Purchasing Agreement