Purchase planning determines what a business should buy, how much it should order and when supply is needed. It converts demand, inventory and lead-time information into planned purchasing actions.
Which inputs are used?
- Demand forecast and confirmed orders
- On-hand and available inventory
- Open purchase orders
- Supplier lead times and minimums
- Safety stock and service targets
- Cash, storage and shelf-life limits
How can a net requirement be calculated?
Assume expected demand is 1,200 units, target ending safety stock is 300, usable on-hand inventory is 500 and 200 units are already due from open orders. The illustrative net purchase requirement is 1,200 + 300 − 500 − 200 = 800 units.
Illustrative purchase requirement
| Planning input | Units | Effect |
|---|---|---|
| Expected demand | 1,200 | Add |
| Target safety stock | 300 | Add |
| Usable on hand | 500 | Subtract |
| Open inbound orders | 200 | Subtract |
| Net purchase requirement | 800 | 1,200 + 300 − 500 − 200 |
The final order may need adjustment for pack size, minimum order quantity, yield loss and timing.
How does lead time affect the plan?
Ordering must begin early enough for production, inspection, transport and receiving. Use realistic variability rather than a supplier's best-case estimate.
What should be monitored?
Track forecast error, supplier performance, inventory aging, stockouts, excess inventory and changes to open orders. Replan when material assumptions change.
