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<ManualTopic ID="/baanerp/cp/onlinemanual/000067" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">To compute the cost of obsolete items</Title>
		<Keyword><Level1>Cost of obsolete items</Level1>
			<Level2>computing</Level2>
		</Keyword>
		<Keyword><Level1>Obsolete items</Level1>
		</Keyword>
	</Header>
	<GeneralSection><Paragraph>If an item has a long <Link href="/baanerp/ti/glossary/glossary#OrderInterv.ti" role="glossary">order interval</Link>, the item can become obsolete at a time when you still have a lot of inventory left.</Paragraph>
		<Paragraph>This risk is important for products with short life cycles. For example, products which are influenced by fashion or fast technological developments.</Paragraph>
		<Paragraph>The <GUIRef href="/baanerp/cp/rao/cprao3120m000#cprao320.ripe" role="formfield">Risk %</GUIRef> field in the <GUIRef href="/baanerp/cp/rao/cprao3120m000" role="session">Resource Cost Values (cprao3120m000)</GUIRef> session expresses the chance per day that an item becomes obsolete.</Paragraph>
		<Paragraph>The cost of becoming obsolete is calculated as follows:</Paragraph>
		<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> Costs = (RP/100) * OI * C </Paragraph>
		</Formula>
		<Paragraph>Where: RP = risk percentage OI = order interval [days] C = cost price</Paragraph>
		<ExampleSection><SectionTitle>Example</SectionTitle>
			<Paragraph>The sales of an item declines. You do not know when the last sales order will close, but you estimate that sales of the product will be discontinued in the next 200 days. A reasonable estimate of the risk percentage is 0.5%.</Paragraph>
		</ExampleSection>
		<Paragraph>Data: C = 20 $ (cost price) OI = 120 days (order interval) RP = 0.5 %/day (risk percentage)</Paragraph>
		<Formula><Paragraph UserLevel="Novice" UserType="Taskuser"> Costs = (RP/100) * OI * C </Paragraph>
		</Formula>
		<Paragraph>Result of the calculation: The cost of becoming obsolete is $12</Paragraph>
	</GeneralSection>
	<RelatedTopics><SectionTitle>Related topics</SectionTitle>
		<RelTopic><Link href="/baanerp/cp/onlinemanual/000042" role="manual">To optimize logistic parameters</Link>
		</RelTopic>
		<RelTopic><Link href="/baanerp/cp/onlinemanual/000131" role="manual">Optimization algorithm for logistic parameters</Link>
		</RelTopic>
	</RelatedTopics>
</ManualTopic>
