How GenLots plans purchases across a central warehouse and its plants, keeps stock at the level total cost justifies, and checks for surplus elsewhere before buying again.
GenLots is an Order Planning technology that runs on top of MRP. For every material a site receives from outside, it decides when to order and how much, by pricing every possible order plan against the full cost of that material and keeping the cheapest one that prevent shortages. It reads what the ERP already knows and writes optimized purchase requisitions back into it. In a network with a central warehouse, the same computation runs at every point where order are placed, at each plant and at the warehouse, and, optionally, before any purchase GenLots can check what the rest of the network already holds.
How does GenLots compute an order plan ?
The ERP knows the stock on hand, the open orders and the consumption day by day over its planning horizon. MRP turns that into orders with fixed rules of the following nature: order what is missing when it is missing, or a fixed quantity, or once a week.
GenLots instead considers every order plan that keeps the material available, from one large order now to small orders every week, and computes the Total Cost of each:
- Material price at the volume step that plan reaches.
- Cost per delivery: freight, receiving, quality inspection, administration.
- Holding cost until consumption, as a yearly rate on stock value.
- Waste risk: the value at risk if the material expires before use.
It rejects any plan that breaks a constraint (minimum order quantity, packaging multiples, supplier lead time, safety stock floor, shelf life) and writes back the cheapest one left as purchase requisitions with dates and quantities. When the source is a central warehouse or another plant, both set up as plants in SAP, the document is a stock transfer requisition: a Purchase Requisition (of category U) with the supplying plant in place of the vendor. The warehouse ships, and the stock moves from one plant’s books to the other’s.
Note: Plants do not buy from the warehouse; they call off stock the company already owns. The document is a stock transfer requisition, a purchase requisition in form only, and the only real purchase in the chain is the warehouse’s order to the vendor.
How often is the order plan recomputed?
Every night, or whenever the ERP signals a change, depending on the setup. Forecasts move, deliveries arrive late, a promotion is added, a line stops for maintenance. Each run triggers GenLots to recompute the plan from current data and adjusts only the requisitions the planner has not firmed. The order plan is never a parameter set once.
How does the warehouse know the demand of its plants, and how far ahead?
Take one purchased material. Each plant knows its demand for it from its production plan, as far ahead as that plan reaches. The warehouse knows the same demand, shifted earlier: a plant consuming on a given day must receive from the warehouse one transfer lead time before, so the warehouse’s demand is every plant’s consumption moved back by its transfer lead time and added up. The warehouse sees exactly as far ahead as the plants do.
The only requirement is that the horizon is longer than the two lead times together. A vendor order for a plant consumption on day X must be placed on day X minus the internal transfer lead time, and minus the vendor lead time. Production plans are always known further ahead than that (weeks of lead time against months of horizon), so the warehouse never orders blind.
What does GenLots optimize at each level?
| Level | Demand it serves | Costs weighed | Result |
|---|---|---|---|
| Central warehouse | All plants’ consumption, shifted by transfer lead time | Vendor price scales, delivery cost, material handling at the warehouse, warehouse holding, shelf lives, etc. | Vendor orders that reach price steps no plant reaches alone, added supply security |
| Each plant | Its own production consumption | Transfer cost per shipment, material handling at the site, plant holding, shelf lives, etc. | A call-off rhythm per plant: small frequent shipments where holding is expensive and distance short, larger where transport dominates |
At the warehouse, GenLots optimizes the buy side of total cost of ownership: material price across the vendor’s volume steps, cost per vendor delivery, carrying cost of central stock, and waste if more is bought than the network consumes before expiry. At each plant, it optimizes the internal supply side: transfer cost per shipment, handling at both ends, carrying cost of local stock, and waste if more is sent than the plant consumes before expiry. Both levels are held to the same rule: supply is secured first, then total cost is minimized.
Where do the stock levels come from?
They are an output of the order plan, not a setting. At every site and for every material, the projected stock is the current stock, plus what the plan brings in, minus what production consumes. GenLots keeps that curve as low as total cost allows, subject to one floor it never crosses: the safety stock.
Safety stock covers what visibility cannot. It is not there to compensate for a short horizon, since the horizon is always longer than the lead times. It covers the two things a plan cannot foresee: a site consuming more than planned within the lead time, and a delivery arriving late. Optionally, GenLots recomputes it on a regular basis to ensure it stays consistent with desired service level and latest demand projections.
When that floor is a DD-MRP buffer’s red zone, GenLots keeps it as a hard floor and only changes how it’s refilled – see how GenLots fits with DD-MRP.
How does inventory rebalancing between sites work?
One site is about to order a material from the supplier while another holds more of it than it will consume for months. Before the requisition is created, GenLots can compute both options:
- Buy new: vendor price, plus a delivery, plus holding the new stock, while the surplus keeps costing holding and scrap risk where it sits.
- Transfer: one truck for the distance, plus holding at the destination, and the surplus is removed from the source.
If the transfer is cheaper, the planner sees it as a suggestion with the other site in the supplier field. If not, nothing appears. The check applies to any material shared across sites: packaging, raw materials, spare parts.
AB InBev ran this across more than 20 breweries in Brazil. At go-live in October 2023, 2.5% of order recommendations were transfers, expected to remove US$1.6 million of inventory over the first year for a few dozen trucks [1].
Frequently asked questions
Does GenLots replace MRP?
No. Demand planning, BOM explosion, lead-time offsetting and netting stay in MRP. GenLots replaces the last step, the procurement proposal, for purchased and transferred materials.
What changes for planners?
Nothing in their tools. GenLots writes purchase requisitions and transfer requests through standard SAP interfaces, firm orders stay firm, and every suggested line shows its cost reasoning and can be overridden with a tracked reason.
Does the warehouse need its own safety stock if the plants have one?
Yes, sized on its own lead time and variability. The warehouse buffer covers late vendors and above-plan consumption across all plants; each plant’s buffer covers the transfer leg. GenLots sets each one separately, or takes the client’s values.
Summary
- One computation at every ordering point: candidate plans priced on total cost, constraints applied, cheapest written back.
- The same computation at each plant and at the warehouse, recomputed as often as the data changes.
- Safety stock is always met and can even be maintained by GenLots
- Surplus at one site can be evaluated before anything is bought again.
References
[1] GenLots, AB InBev inventory rebalancing, review of 11 October 2023, genlots.com.
