# Quantities / Cost logic

In the following, the logic for the quantities, prices and costs is explained for the fields of the pre calculation.

Last updated

In the following, the logic for the quantities, prices and costs is explained for the fields of the pre calculation.

Last updated

Calculation Quantity (Base)

In practice, it happens that the required quantities in the calculation do not correspond to the quantities actually ordered/produced. In addition, the same items may be used in several modules. As a result, the quantities from the calculation often deviate and lead to problems in the price or cost calculation, since e.g. quantity discounts are not taken into account. The goal is to find a “calculation quantity (base)” ($Q_C$), with which e.g. the price determination is made. The price or cost for this base quantity is then “calculated down” to the smaller quantities.

In the demandPlus+ precalculation, the required total quantity (see Fields) per item and variant is calculated for this and used for the next steps. Various other fields, such as the “Reordering Policy”, play a role in calculating the “calculation quantity (base)” ($Q_C$).

First, a “quantity by reordering policy” (Later: $Q_R$ ) is calculated. For this purpose, a “base quantity” (Later: $Q_B$) is used as an auxiliary construct and is compared with the planning parameters.

a) Reordering Policy = “empty” or “order” $Q_R$ = Quantity (Base) from calculation line

b) Reordering Policy = “Fixed Reorder Qty.” $Q_B$ = Total Quantity (Base) from calculation line If “Reorder Quantity” (from item or SKU) > $Q_B$ => $Q_B$ = “Reorder Quantity” $Q_R$ = $Q_B$ (Rounded with “Order Multiple”)

c) Reordering Policy = “Lot-for-lot” or “Maximum Qty.” $Q_R$ = Total Quantity (Base) (Rounded with “Order Multiple”)

In case of a purchase item(Replenishment System = Purchase) the “Calculation Quantity (Base)” ($Q_C$) corresponds to $Q_R$ (quantity by reordering policy). In the case of make-to-stock production, a “Calculation Quantity (Base)” ($Q_C$) is searched for, which also takes into account the minimum and maximum order quantity, as well as the “Lot size” field from the item or stockkeeping unit(SKU). The following logic applies:

If the “Minimum Order Quantity” or the “Lot size” is greater than $Q_R$ => $Q_R$ = maximum of “Minimum Order Quantity” and “Lot size”. If the production is limited by the “Maximum Order Quantity”, the quantity must be adjusted so that at least $Q_R$ (taking into account the “Minimum Order Quantity”) is produced.

An exception is made in the case of make-to-order production (Manufacturing Policy = Make-to-Order). Here $Q_R$ is not calculated. In this case, the “Calculation Quantity (Base)” ($Q_C$) always corresponds to the Quantity (Base) from the calculation line.

Examples

Price determination

If all item vendors are taken into account (see Fields), a price determination is also carried out for them. The most favorable (net) price of the vendors is used as the Direct Unit Price and gets converted back to the unit used in the calculation line.

Net means that the line discount has already been deducted.

Price Determiniation always takes place in the client currency.

Expected Operation Cost Amt. and Expected Capacity Ovhd. Cost

The calculation of Expected Operation Cost Amt. and Expected Capacity Ovhd. Cost is a bit more complicated. First, the total quantity for the operation is calculated.

The “Quantity (Base)” of the module is calculated very similarly. However, this refers to the parent item’s scrap. The scraps mentioned here belongs to the current module routing, not to the parent module. So the scraps are NOT calculated twice.

The decisive factor for the calculation is the Unit Cost Calculation of the work center. This results in the following two cases:

Unit Cost Calculation = Time

The setup costs are only added if the field “Costs Incl. Setup” is checked in “Manufacturing Setup”. If this is the case, the setup costs are made up as follows: Setup costs= A * B * C A = Setup Time B = Quantity (base) of the module C = Setup Factor

The Setup Factor and the No. of Setup Processes are already described in the fields and are only explained again here for completeness.

Finally, the costs can be calculated Expected Operation Cost Amt. = Total Capacity * Unit Cost (Work Center or Machine Center) Expected Capacity Ovhd. Cost = A * (B * C + D) A = Total Capacity B = Direct Unit Cost (Work Center or Machine Center) C = Indirect Cost % (Work Center or Machine Center) D = Overhead Rate (Work Center or Machine Center)

Unit Cost Calculation = Units

When calculating the capacities, the quantities are brought to the same “time unit”. For reasons of complexity, this has been ignored here.

**Result:
**$Q_R$ = 300 pce.
$Q_C$ = 300 pce.

**Explanation:
**$Q_R$ results from the required Total Quantity of the calculation. However, since the Maximum Order Quantity is smaller than $Q_R$, the quantity must be divided into several lots. This results in 2 lots (e.g.: 200 pce. + 100 pce.).
This results in: $Q_C$ = 200 pce. + 100 pce. = 300 pce.

**Result:
**$Q_C$ = 100 pce.
$Q_R$ is not calculated

**Explanation:
**Since this is a make-to-order production, all parameters are ignored. The Quantity (Base) is always used as the calculation quantity. So $Q_C$ = Quantity =100 pce.

**Result:
**$Q_R$ = 450 pce.
$Q_C$ = 600 pce.

**Explanation:
**$Q_R$ results from the planning parameters as in example 2. However, since the Maximum Order Quantity is smaller than $Q_R$, the quantity must be divided into several lots.
In this example, there are at least 2 lots. Due to the Minimum Order Quantity this results in:
$Q_C$ = 300 pce. + 300 pce. = 600 pce.

**Result:
**$Q_R$ = 100 pce.
$Q_C$ = 100 pce.

**Explanation:
**Since this item does not have a Reordering Policy, $Q_R$ equals the quantity from the calculation line (100 pce). However, since the lot size is larger, $Q_C$ = 400 pce.

For price determination, the “Calculation Quantity (Base)” ($Q_C$), described above, is to be seen as the basis. Since this quantity refers to the base unit of the item, it is first converted into the corresponding purchasing unit. Based on this, a price determination for the vendor is carried out from the item or sku.

This is calculated as follows: $Total\ Quantity_{Operation}$ = A * B * C + D A = Quantity (Base) of the module B = 1 + Scrap Factor % (Accumulated) C = 1 + Item Scrap % (module) / 100 D = Fixed Scrap Quantity

Total capacity = A * B + C A = $Total\ Quantity_{Operation}$ B = Run Time C = Setup Time

The setup factor was introduced in order not to allocate the setup costs completely to the (partly) small quantities. For items that are produced in large quantities but used in small quantities (and vice versa), this could lead to a large difference in the Expected Operation Cost Amt. The setup factor (S) depends on the Maximum Order Quantity and “Calculation Quantity (Base)” ($Q_C$) (See Calculation Quantity (Base)) and is calculated as follows:

i) If no Maximum Order Quantity is defined => S = No. of Setup Processes / $Q_C$ => S = 1 / $Q_C$

ii) If the Maximum Order Quantity is defined => S = No. of Setup Processes / $Q_C$ => S = rounded up ($Q_C$ / “Maximum Order Quantity”) / $Q_C$

Expected Operation Cost Amt. = = $Total\ Quantity_{Operation}$ * Unit Cost (Work Center or Machine Center) Expected Capacity Ovhd. Cost = A * (B * C + D) A = Total QuantityOperation B = Direct Unit Cost (Work Center or Machine Center) C = Indirect Cost % (Work Center or Machine Center) D = Overhead Rate (Work Center or Machine Center)

**Result:
**$Total\ Quantity_{Operation}$
**=** 100 pce.
Expected Operation Cost Amt.
= 100 pce. * 1.20 € / pce.
= 120 €

**Result:
**$Total\ Quantity_{Operation}$
= 100 pce. * (1 + 0.1) * (1 + 20 %/100 %) + 10 pce.
= 100 pce. * 1.1 * 1.2 + 10 pce.
= 142 pce.

**Result:
**$Total\ Quantity_{Operation}$
= 100 pce.
Total Capacity
= 100 pce. * 5 min. / pce.
= 500 min.
Expected Operation Cost Amt.
= 500 min. * 1.20 € / min.
= 600 €

**Initial situation:**
Quantity (Base) = 100 pce.
$Q_C$ = 450 pce. (Calculation Quantity (Base))
Unit Cost Calculation = Time
Cost Incl. Setup = No
Fixed Scrap Quantity = 20 pce.
Run Time= 5 min. / pce.
Unit Cost = 1.20 € / min.
Setup Time = 90 min
Indirect Cost % = 15
Overhead Rate = 0.50 € / pce.
Direct Unit Cost = 0.609 € / pce.

**Result:
**$Total\ Quantity_{Operation}$
= 100 pce. + 20 pce.
= 120 pce.
Setup Facor (S)
= Roundup(450 pce. / 200 pce.) / 450 pce.
= 3 / 450 pce
= 0,00667 / pce
Total Capacity
= 120 pce. * 5 min. / pce. + 90 min. * 100 pce. * 0,00667 / pce
= 600 min. + 60 min.
= 660 min.
Expected Operation Cost Amt.
= 660 min. * 1.20 € / min.
= 792.00€
Expected Capacity Ovhd. Cost
= 120 pce. * (0.609 € / pce. * 0.15 + 0.50 € / pce.)
= 120 pce. * 0,59135 € / pce
= 70.962 € ≈ 70.96 €