Short & sweet: Billing interval

The allocation interval plays a major role in the allocation of forecast values (planned requirements) with incoming customer orders and is divided into a backward and forward allocation interval.

If a customer order is entered in the ERP system, these two horizons determine the time window in which the forecast values are “eaten up” by the specific new customer order. This is generally done by first deducting the sales order quantity from any planned requirements on the requirements date of the sales order. If the planned requirements quantity is less than the sales order quantity, the remaining sales order quantity is deducted from planned requirements that are ahead or behind schedule.

Whether the system should first calculate into the future or into the past can usually be defined in the ERP systems. Allocation takes place until either the entire sales order quantity has been deducted or all planned requirements in the allocation interval have been “eaten up”.

Our tip:

The correct choice of billing interval can have a significant impact on the readiness for delivery and the average stock level of an item. In practice, a calculation interval of 14 days backwards and 30 days forwards has proven to be a good rule of thumb, but in simulations we can always show significant stock reductions by fine-tuning the forward and backward calculation intervals.

Further information on this topic can be found here:

Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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