Inventory Policy

Inventory Policy

Purpose of Inventory Policy

Inventory policy is about setting safety stock and replenishment levels based on the organization's risk tolerance for stocking out. The system uses the lead time and demand variance to calculate optimal levels of stock.

Desired service level and stocking policy is set based on an items segmentation classification. For example, items with low variability should be made to stock and have a 95% service level.

The grid has a lot of useful quantitative information, like the expected demand during the lead time, the recommended reorder frequency in this case four days and the output from the inventory optimization, safety stock and reorder quantity.

The official safety stock becomes a minimum target, and the maximum target is calculated from the sum of the safety stock plus the reorder quantity. Users can override the calculated safety stock and reorder quantities to publish an official minimum and maximum target.

These official targets are then used in inventory analysis and SOP.

Arkieva Inventory Policy provides a recommendation for safety stock and reorder points based on the risk tolerance of the organization.   Arkieva calculates the safety stock based on the lead time variance and the estimated demand variance from the forecast.

In a retail type of situation where replenish cycles are fixed (example daily, weekly, etc.) Arkieva provides a method based on Economic Order Quantity (EOQ) principles. This method calculates the replenishment quantity and re-order frequency based on demand.

Use Inventory Policy to 

  1. Calculate Safety Stock and Reorder Quantities for items
  2. Override recommended Safety Stock and Reorder for items
  3. Define fulfillment percentages for Make to Order (MTO) items 
  4. Define fulfillment percentages for Make to Stock (MTS) items

Understanding the Sawtooth Chart for Inventory Replenishment



Adjusting Policy and Fulfillment Settings 

Make changes to the default engine settings used to calculate safety stock and re-order quantities by selecting “Settings” in the toolbar. 
Here you can adjust the fulfillment percentages and production policy for items. 
Consider using the Make to Stock (MTS) policy when the item is in high demand and is very popular. An item like this should already be made and available in a warehouse to meet customer demand.  
Consider using the Make to Order (MTO) policy when the customer count is low, or the demand is very sporadic. The production of an item would be held off until a customer order has been made. 






Adding Inventory Policy via Excel or SQL/Enterprise

Users can Upload Inventory Policy Via Excel

  1. Use the Starter Template (Excel) given in upload option and fill in all the required details as per format given in template.



  1. Click on Upload Data & select the Microsoft Excel option to upload the data.


  1. We can directly upload the excel file using File Upload or give a link to select the file in Remote File Path.



  1. Once "Upload Completed" pop up, click on Continue.



Adding Inventory Policy using SQL Server or Arkieva Enterprise

  1. Users first Create & update data in tables ([ArkievaSaaSInput].[Inventory Policies], [ArkievaSaaSInput].[Stock Inventory Policy]) in the database.



  1. Next Click on Upload Data & select SQL Server or Arkieva Enterprise to upload the data.




  1. Enter Server Name & Database Name then click on Continue.




Settings Inventory Policy

Expanded Inventory Policy Columns

When working in the Inventory Policy environment, it is important to know that there are columns that need to be expanded to reveal additional columns when you make any changes to the data. The unexpanded columns only show the official values for Safety Stock and Re-order Quantity. To view your changes, you will need to expand these columns to view the Calculated (unofficial value) columns.

Inventory Policy

Inventory policy is created in the Inventory tab of the Settings section. From here a policy's Name, Category, Service Level %, Days, and Evaluation Frequency Days are set by a user. 

  1. Click Add New to launch the Add Policy Item drawer. Type in a name and select a Category from the dropdown. 
  2. Selecting MTS will show the Service Level % and Evaluation Frequency settings. Selectable options for Evaluation Frequency are None, Quarterly, and Annually. 
  3. Selecting MTO will not show settings for Service Level % and Evaluation Frequency.
  4. Selecting Coverage will show settings for Days and Evaluation Frequency.



Safety Stock

Supply Buffer

Supply buffer is calculated at the same level where supply history is provided; whether Finished Goods, Intermediates, or Raw Materials.



Additionally, supply buffer is not calculated for any Finished Good, Intermediate, or Raw Material if its corresponding supply history has not been uploaded.

Supply Buffer Override Example













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