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Selecting Lowest Price Vendor with Vendor Lead Time
During replenishment calculation, it is possible for the system to consider the different prices offered by various vendors for an item and automatically select the vendor with the lowest price in the replenishment journal.
To enable this feature for an item, select the Select Lowest Price Vendor check box on the Ordering FastTab in the Retail Item Card page.
Note: Select Lowest Price Vendor is not applicable to BOM Replenishment Journal.
In Purchase Replenishment Journal, the quantity to be purchased will be calculated according to the demand during the coverage period. Based on this quantity, the system will find and select the vendor that fulfills the minimum quantity and offers the lowest Direct Unit Cost defined in the Purchase Prices setup. Depending on the Purchase Order Type of the Purchase Replenishment Journal, the total quantity used to select the lowest price vendor can either be grouped by item, or by item and location.
To demonstrate the differences between the grouping types, consider the below price setup and purchase quantity for an item.
Purchase Prices:
| Vendor No. | Minimum Quantity | Direct Unit Cost |
| VENDOR1 | 20 | 10.00 |
| VENDOR2 | 50 | 8.00 |
Purch Replen. Jrnl Details:
| Location Code | Quantity |
| S0001 | 30 |
| S0002 | 40 |
Example 1: To replenish warehouse (grouped by item)
Purchase Order Type: One Purchase Order per Vendor
Based on this Purchase Order Type, the quantity will be grouped by item across all locations, thus the total quantity will be 70 and this fulfills the minimum quantity for VENDOR1 (20) and VENDOR2 (50). As VENDOR2 offers a lower price, it will be selected with the Direct Unit Cost of 8.00 to replenish the warehouse.
Example 2: To replenish stores (grouped by item and location)
Purchase Order Type: Purchase Orders for Receiving Locations
Select Lowest Cost By: Item and Location
Based on this Purchase Order Type and the Select Lowest Cost By option, the quantity will be grouped by item and location, thus each location's quantity can only fulfill the minimum quantity for VENDOR1 (20). To replenish the stores, VENDOR1 will be selected with the Direct Unit Cost of 10.00.
Note: For this purchase order type, it is possible to group the quantity by item by selecting the Item option in the Select Lowest Cost By field. This can be useful if the store locations are close to each other, where you can group the purchase quantity across these locations to get a lower price.
Selecting Lowest Price Vendor with Vendor Lead Time
When both Select Lowest Price Vendor and Enable Lead Time Calculation are enabled, the system will consider all the vendors that are assigned to the item and calculate the quantity based on each vendor lead time. Different vendor lead time will result in different quantity, therefore the system will consider each possibility and choose the vendor that offers the lowest price with the required quantity. See Lead Time Calculation for more information on how the lead time works.
Example:
Assuming that we are calculating the replenishment quantity for an item in location S0001 with the below data and setup.
Effective Inventory = 30, Daily Sales = 5, Coverage Days = 7
Item Vendor Catalog:
| Vendor No. | Lead Time Calculation |
| VENDOR1 | 3D |
| VENDOR2 | 1D |
Purchase Prices:
| Vendor No. | Minimum Quantity | Direct Unit Cost |
| VENDOR1 | 5 | 10.00 |
| VENDOR1 | 15 | 7.00 |
| VENDOR2 | 5 | 9.00 |
| VENDOR2 | 30 | 6.00 |
Calculation Steps:
- The system will consider the vendors from Item Vendor Catalog and calculate the quantity to replenish based on each vendor lead time.
- Based on the quantity to be purchased from each vendor, the lowest Direct Unit Cost that fulfills the minimum quantity in Purchase Prices will be determined.
- As VENDOR1 offers the lowest price among the vendors, the system will create a replenishment journal line to purchase from VENDOR1 with the Quantity of 20 and the Direct Unit Cost of 7.00.
Calculation Formula:
Lead Time Days x Daily Sales = Lead Time Sales Quantity
Effective Inventory - Lead Time Sales Quantity = Projected Effective Inventory
Coverage Days x Daily Sales = Coverage Sales Quantity
Coverage Sales Quantity - Projected Effective Inventory = Quantity
| Vendor No. | Location Code | Eff. Inventory | Daily Sales | Lead Time Days | Lead Time Sales Qty. | Projected Eff. Inventory | Coverage Days | Coverage Sales Qty. | Quantity |
| VENDOR1 | S0001 | 30 | 5 | 3 | 3 x 5 = 15 | 30 - 15 = 15 | 7 | 7 x 5 = 35 | 35 - 15 = 20 |
| VENDOR2 | S0001 | 30 | 5 | 1 | 1 x 5 = 5 | 30 - 5 = 25 | 7 | 7 x 5 = 35 | 35 - 25 = 10 |
| Vendor No. | Location Code | Quantity | Direct Unit Cost |
| VENDOR1 | S0001 | 20 | 7.00 |
| VENDOR2 | S0001 | 10 | 9.00 |
See also