Some items in your stock will be used up quickly. In the example of a small café, you might use a lot of paper cups every day, so you go through a very large quantity in a week. In contrast, you might use laundry detergent slowly. These are different usage rates.
The usage rate has an impact on how much stock you need to keep on hand (your ‘par level’), and how frequently you need to re-order the item. For high usage rate items, you usually need to keep more on hand, and usually need to order more often.
It’s complicated to track the usage rate by hand for all your items. Instead, Silo does this automatically for you, based on how often you re-order the item and/or how often the items are marked as consumed. We use the usage rate to determine re-order quantity, par level and other things.
Usage rate applies to a Product, and you can find it on the Product Details page.
A ‘par level’ is a set quantity of an inventory item that should be on hand at all times. The perfect par level should take into account the usage rate, the value of the product, the delivery time, the cost of delivery, and any discounts available for larger quantities. Ideally, it should also consider how reliable deliveries are. For example, if delivery normally takes 2 days, but sometimes is delayed by a week due to supplier issues, you will need to hold more stock in case of disruptions.
Holding too much stock is expensive. It’s difficult to figure out exactly what the par level should be by hand. Many managers simply hold large quantities of stock, over and above what would be required, because they are not able to calculate the perfect par level. Fortunately, Silo calculates the par level for you.
Par Level applies to a Product, and you can find it in the Product Details page.
The Re-Order Quantity is what you’d expect - how much of that item that you re-order each time. It helps to make this a consistent quantity, so that your team doesn’t have to decide every time how much to order.
The advantage of a higher Re-Order Quantity is that you usually pay less on shipping, and you may have access to discounts for higher quantities. The disadvantage is that you have to store more product, which ties up your cash.
Silo can help you calculate the re-order quantity based on your usage rate, shipping cost and par level so that you get the right balance.