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Smart Ordering is a dynamic system that automatically adjusts your desired inventory levels based on demand increase or decrease. When you run a Purchase Order based on Smart Ordering, it looks at your sales cycles, automatically adjusts quantity, and adds products to the order based on sales history. This article explains how Smart Ordering works and how to use it to manage your inventory levels.

Smart Ordering Basics

The Smart Ordering process is much more complex than the other two Purchase Order population methods (Manual addition and Desired Inventory Level). However, this can yield the best inventory management for your store. 

Smart Ordering helps you optimize your inventory stock by calculating desired inventory levels based on sales and ordering history. You are generally not able to commit the amount of time it would take to analyze all of the factors that go into these calculations. Because of that, Smart Ordering not only saves you time, but also helps prevent over- or under-stocking of products.

Smart Order Analysis Points:

• Desired Inventory Level Settings (DIL)
• Sales History (turns: how often an item sells)
• Maximum Number of Sales in a Date Range (to be prepared for large up-ticks in sales)
• Current Quantity on Hand (QOH)
• Current Quantity on Order (QOO)
• Out of Stock Occurrences (Stock Outs)

The Smart Order process can be broken down into some key ideas.

• Cycles — A Cycle is the time between Purchase Orders. The cycle is measured from the day after your PO was received, to the moment you are placing the purchase order.
• Last Cycle — The Last Cycle is the most recent cycle, meaning the period from the day after your Purchase Order was received until the moment you are placing this order.
• Number of Cycles Item Was Sold In — This means looking back on your set number of cycles (we recommend 5), and identifying how many of them had at least one sale of the item (not how recently or how much of the item was sold).
• Max Cycle Units Sold — This goes through each individual cycle, finding the maximum quantity of an item that sold in a given cycle. If four cycles had 2 sales of an item each, and one cycle had 4, the Max Cycle Units Sold for that set of cycles would be 4.
• Last Cycle Sales — This is the amount of units that sold in the Last Cycle.
• Item Stock Out — This is when an item’s Quantity on Hand has been decreased to zero in a cycle, causing you to be out of stock of the item.

When Calculating Cycles:

• If multiple orders are made to the same vendor on the same day, the first PO will be used, and the rest will be ignored.
• If a PO is marked as Special Order during setup, the date for this PO will be ignored when calculating cycles.
• Quick POs are ignored when calculating cycle dates.
• Smart Ordering does not consider your Stock Day setup in Manage Catalog > Stock Days when making cycle calculations.
• If you select more cycles than you have PO history for, Smart Ordering will first use all PO dates that exist, then it will use one week as a cycle length for the additional cycles.

When you're first starting to use the eTailPet system for Purchase Orders, it's best not to start using Smart Ordering until you have enough purchasing and sales history to allow the calculation to be based on your actual PO data. We recommend running through 5 cycles of ordering using the Desired Inventory Level method (see the article on Purchase Orders for how to use this method) before using Smart Ordering.

Example:
In the example below, you can see that this retailer orders once a week from this vendor. The deliveries usually come on Wednesdays, but sometimes run a day late. Occasionally, the retailer places a special order from this vendor during the same week as their regular order. They flag the order as Special Order when they create it so that it doesn’t get calculated as part of a Smart Order Cycle. We calculate the dates of a cycle by starting with the date we received the shipment for a PO and looking back to just after we sent the PO. So in the example, we are looking back from today (February 22) 5 cycles for our new PO Smart Order. The first cycle is last week, and the 5th cycle is 5 weeks ago, for your reference.

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Setting Up a Smart Order

The Smart Order is a customizable process that allows you to quickly set general guidelines for how you would like to reorder your products. Generally, these parameters will be the same each time you run a Smart Order, although there will be certain times like the holidays or peak sales seasons when you will want to increase these values.

• Number of Cycles — The first setting you should consider is how far back you would like to look, or more specifically how many cycles you would like Smart Order to consider. User your best judgement here and consider if any of the cycles you're looking at might throw off your reordering. For example, you don’t want to look back to December in February, as those seasonal sales will not be reflective of what you will be needing this week. We suggest looking back 5 cycles; however, you can adjust this to your preference.
• Desired Inventory Levels — The starting point for every item in the smart order system is the product’s Desired Inventory Level (DIL). Initially you set this manually, and it requires the product to be one you will actively be reordering. The Smart Order system will adjust this Desired Inventory Level each time you populate a purchase order using the Smart Order system. If you are new to our system, it is recommended that you populate your purchase orders using only Desired Inventory Level for the first five cycles prior to switching to smart order. You can do this by checking the box labeled Calculate based on desired inventory level? just above the data table, as pictured here.
  
• Number of Cycles Item was Sold In — A key way in determining future performance of an item is by examining past performance. Each “row” represents the number of the previous cycles in which you have sold a particular item. The Smart Order will adjust the Desired Inventory Level for items that you have sold at least once per cycle for all cycles according to way you configure the top row. The Smart Order will similarly adjust the DIL for items that you have not sold in any of the cycles selected according to your user adjustments on the bottom row.
• Smart Order Parameters — Now you will select the parameters for the Smart Order PO by determining what level to set the Desired Inventory Level.
  • (1) The number of cycles in which you sold the item (Example: If you had a single sale for the item in 5 of the last 6 cycles, your number would be 5)
  • (2) Set the DIL to              
  • (3) More than select option: (Max Cycle units sold or Last Cycle Sales, see definitions above)
  • (4) If the item stocked out select option: (Last Cycle or Any Cycle)
  • (5) Add               

These parameters determine how you would generally like to set your Desired Inventory Level. They can be confusing. It might help to think about it as a logic statement, and the image above shows how it goes into the PO:

The amount by which you increase your DIL is entirely up to you. However, you do not want to set this number higher than two or three. The final portion of the logic statement above indicates whether you would like to set this number using the Maximum Cycle Units Sold or the Last Cycle’s sales. The definitions are listed above for you, if needed. If you have a period where the amount you are selling is erratic, then it would be good to select Last Cycle’s sales to get a more accurate result. Maximum Cycle Units Sold would be a good choice if you want to have more items in stock.

Here is a more detailed example:

Cost of Goods Sold

COGS is Cost of Goods Sold. Smart Order will automatically calculate how much you spent on products purchased from this vendor since the last purchase order. This provides you with a good benchmark to compare with how much you are spending on the current purchase order versus the COGS since the last PO.

Inventory Management

How to Make Decisions

Smart Ordering allows you to give input on how it will make decisions. But the system can’t predict what’s going on in your market area (sorry, no crystal ball included!). For example, you may have recently had a promotion, or maybe you are gearing up for one. There could be a seasonal event coming up, or a competitor store in your area may have just closed. These are all things you might consider when setting up your Smart Order.

Increasing Inventory

If you are gearing up for an event, you may want to make sure you have extra inventory to keep up with the demand. Your Smart Order might look something like this. The faster moving items will be increased. The slower moving items will be increased only if they stocked out.

With these parameters, we would most certainly be increasing the inventory level in the store. Think about how many items in your store sell every week from one distributor. Now imagine adding 2 more than the maximum units sold over the last 5 weeks for each item, and if the item stocked out, adding 2 more.

Keeping it Tight

If your store is adequately stocked (or even a little overstocked), then your Smart Order might look something like this. You DO NOT have to put any number in the boxes. If you leave it at zero, Smart Order will still adjust your desired inventory level. It will just be using sales demand and not adding any extra.

Generally, you will want to choose Last for faster moving items and Max for slower moving items. Since slower moving items are not sold in as many cycles, there is a greater chance for the Last sale cycle to be 0.

Troubleshooting Smart Ordering

“It seems clear that it should have been included in the order because it has had sales!”
Sometimes our clients have questions about how Smart Ordering calculated their PO suggestions. They often want to know why an item was not included. Here’s some things to consider and review:

Why wasn’t my item included? It had sales!
Smart Ordering only includes sales that occurred between the start and end dates of the selected cycle range.
Check to make sure that the sales you think should be included are within that date range.

Why doesn’t the PO show the correct number of sales for my item?
When starting a PO, Smart Order first counts in how many cycles the item had sales. If you selected 3 cycles, then an items sales can have 0/3 (no sales), 1/3 (at least one item sold in one of the three cycles), 2/3 (at least one item sold in two of the three cycles) or 3/3 (at least one item sold in three of the three cycles). This number does not include any calculations regarding the quantity of sales in each cycle.
Check to be sure that you are not confusing the “number of cycles that had sales” with the “quantity of items sold.”

Why is my PO suggesting too few or too many of my item?
Smart Order decides how many items to suggest by calculating quantity on hand (QOH), quantity on any orders (QOO) that have been submitted but not checked in, and the decisions you made when initially setting up the PO.
Try exporting the Smart Order Log when you are in the open status of the PO. You can verify the statistics of your QOH, QOO, and any decisions you made during setup about adding extra quantity.

⚠️Important Note About Quick POs: When you run Smart Order, it adjusts the DIL for products and looks at cycles. It will not consider a Quick PO as a cycle, and it won’t adjust the DIL when running Quick PO. But when you run Smart Order, it will still consider the quantity on order from a Quick PO.

Boss Quote
Make sure your human understands that Smart Ordering is the best way for them to stay ahead on inventory management. Even a kitten knows that. If they give you any flack, just remind them that you have to catch your mouse before you can eat it. Then they'll understand.

— Adrian, Wenatchee, WA

Related Topics

Adding and Importing Products

My Products Overview

Product Details Page

Private Products

Product Manager

Purchase Orders

The Purchase Order Process

Batch Cost and Price Updates

Frequently Asked Questions

Q: I have a question, but I can't find my answer here. How do I get more assistance?

A: You can ask any question at the number listed here. Contact our support team at: (323) 370-0738 for the U.S., and (888) 370-2363 for Canada.