Inform ERP uses product ranks to give you additional insight into your products and categorize products for cycle count frequency. Please note that all Stock and Non Stock products will receive a ranking. Inform will not update the rank of Consumable, Discontinued, or Inactive products through any automated processes.
By default, it calculates product rank based on Hits, which is the number of times that a product appears as a line item on an invoice. However, you can alternatively base rank on Sales Dollars or GMROI, or a combination of the three variables. Product ranking is recalculated each night, so changes made to ranking calculations are reflected in the product rank the next day.
You can also configure Inform ERP to automatically set poorly performing Active products to non-stock status, based on a rank threshold. For example, any item that drops to D rank can be set to a non-stock item, so you do not waste shelf space on poorly moving product. You can later change the status back to Active, and Inform will wait a set number of days before re-evaluating the item.
Note: By default, product ranking is recalculated each weeknight: changes made to ranking calculations are reflected in the product rank the next day
Inform ERP calculates a rank for each product based on the variables that you choose to include in the rank calculation. Each rank is assigned a numerical value ( A = 40, B= 30, C = 20, D = 10). Those values are used with the weighted value assigned to each metric to calculate an overall numerical rank for the item, from 0-40. Letter ranks are assigned to these numbers using a sliding scale to give a rank of the item.
- Go to File > Product > Ranking Criteria.
- Click Edit.
Decide which criteria to use in the Calculation, and define the ranking metrics:
- Sales ($): The total value of the products sales. Each night, the system will list the items from greatest value to least value. The top X% of the list will be A ranked, the next X% will be B ranked, etc. The total must equal 100%.
- Hits: The number of times the product appears on an invoice. As with sales, each night, the system list the items from greatest number of hits to the least. The top X% of the list will be A ranked, the next X% will be B ranked, etc. the total must equal 100%.
- GMROI: Gross Margin Return on Investment. An inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost.
Now under the Weights section, assign the Weight each variable has in the calculation.
If you want to value all variables equally, set two of them to 33% and one to 34%. The weights must add up to 100%. If you do not want a metric to be used in the calculation, set the weight to zero. This amount will be multiplied by the numerical rank value of the metric and then added together to calculate a total numerical rank.
When the system calculates the rank for a product, it assigns a numerical value to each letter rank (A = 40, B = 30, C = 20, D =10) and then uses that number, multiplied times the weight, to calculate a total rank number for the product. The spread tells the system what letter rank that number corresponds to.
Item Q is A ranked in Sales $, B ranked in Hits, and B ranked in GMROI. All variables are weighted equally. The system completes the calculation below to get a numerical value of the rank of the item.
The spread section defines what rank that number corresponds to on a sliding scale. In the example shown below, 21-40 is an A ranked product, so Item Q would be A ranked because its weighted score of 33 is within the 21-40 Spread configured for A, below.
- If you'd like to flag very slow moving items as non-stock, so that you do not bother tracking or stocking this product any longer, then from the Non-Stock Threshold list, choose the rank A-D that will flag the product as Non-Stock. Typically, you would set this threshold to D, and make sure that you set the D calculations to be the lowest possible Sales, Hits, and/or GMROIs.
When the product’s rank by warehouse reaches this rank, the status of the product in that warehouse will change to non-stock.
If a user manually changes this product back to an Active item, the system will wait until the Re-evaluation #of days to change the product to non-stock again, if the rank does not improve. If you select a Non-Stock Threshold, you must specify the Re-evaluation number of days.
If you do not want the system to change the stock status, set the Non-Stock Threshold to None.
Setting the Non-Stock Threshold changes the Status of the item by warehouse (File>Product: Setup, Purchasing–Warehouse Procurement, check Stock?); not the overall Status (File> Product: Setup ). This is true even if your company has only one warehouse.
- Click Save. The rank recalculation runs overnight, reflecting the new product ranks by the next day. Utilities>Phantom Monitor: Product Rank Update)