Infor LN & Baan Tips & Tricks for OPERATIONS: What is Statistical Inventory Control (SIC) and How Does It Work?

Statistical Inventory Control (SIC) is an inventory-controlled order system designed to maintain stock levels based on predefined thresholds, rather than being demand-driven like EP (Enterprise Planning). Since SIC relies on inventory levels, it may lead to higher stock levels. To minimize financial risks, SIC is best suited for:

• Low-cost items.
• Items with predictable demand or short lead times.

Applications of SIC

• Low-Cost Items: Particularly effective for inexpensive goods.
• Predictable Demand or Short Lead Time: Suitable when demand patterns are stable or lead times are minimal.
• Warehouse-Specific Planning: Useful for planning by warehouse rather than across the supply chain.
• Trading Industries: Commonly employed in sectors like supermarkets.
• Immediate Demands: Effective for items required immediately by customers.
• Ease of Use: Simple to implement and manage.

Limitations of SIC

• Does not account for dependent demand from planned orders (e.g., MPS/MRP/INV).
• Does not generate distribution orders.
• Ignores time-phased planned orders.
• Lacks forecast consumption techniques.
• Uses both nettable and non-nettable warehouses.

How SIC Works

SIC operates based on the Reorder Point, Stock Levels, and Order Method.

Triggering SIC

When Economic Stocks (calculated as On-Hand Inventory + On-Order – Allocated Stocks) on the Horizon Date fall below the Reorder Point, SIC triggers the creation of:

• Planned Purchase Advice.
• Planned Production Advice.

Order Methods in SIC

The quantity for these advices is determined by the Order Method, which can be one of the following:

• Replenish to Maximum Stock
• Fixed Order Quantity
• Economic Order Quantity (EOQ)
• Lot-for-Lot

Example: SIC in a Supermarket

Scenario: Managing stock for Ice Cream (1 Kg Pack)

• Current Stock: 10 PCs
• Reorder Point: 5 PCs
• Safety Stock: 2 PCs
• Lead Time: 1 Day
• Order Method: Replenish to Maximum (Maximum Stock: 20 PCs)
• Maximum Anticipated Consumption: 3 PCs/Day

Process:

1. Customer purchases reduce the stock.
2. When stock reaches 5 PCs, SIC is triggered.
3. A Purchase Advice is generated for 15 PCs to replenish stock to the maximum level (20 PCs).
4. During the lead time (1 day), the remaining 3 PCs (excluding Safety Stock) meet customer demands.
5. In emergencies, Safety Stock can also be utilized.

Statistical Inventory Control offers a practical approach for managing inventory levels, particularly in industries with predictable demand or fast-moving items. However, its limitations make it less ideal for complex or time-phased planning scenarios.

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Kathy BartheltKathy Barthelt

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