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9.1.1 Quantification

Average Monthly Consumption (AMC) and Re-Order levels

Reliable determination of re-order levels is one of the challenges for each CMS. SIGMED serves as a tool in the process of quantification; it is not a decision-maker.

SIGMED provides statistics on the average monthly consumption (AMC). In SIGMED the consumption is based on sales data (=quantity issued) as well as demand data.

Due to significant fluctuations in consumption, the AMC is based on past 3, 6 and 12 month’s demand and sales data. Moreover, slower moving items will need to use more demand history to get an accurate model of the demand.

The calculation of the AMC is complex and therefore it is illustrated by the following example (see Table 9.1 for base data).

Table 9.1 Base data for AMC

 

Jul-03

Aug-03

Sep-03

Oct-03

Nov-03

Dec-03

Demand

0

40

0

100

200

0

Sales (quantity issued)

0

20

0

100

100

0

Stock

20

20

0

200

100

0

 

 

 

 

 

 

 

out-of-stock (days)

10

20

30

0

5

31

SIGMED applies the following rule: 

The AMC is calculated as: Number of Units divided by the Number of Months

If there is no demand for a product during one month, this month will not be considered in the calculation of the AMC if the number of out-of-stock days is equal or more than 15 days.

Each day SIGMED checks whether a product is in stock or not. At the end of the month SIGMED knows the total number of out-of-stock days for each product item.

Applying those rules will give the following results for the AMC (6 months):

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