The Use of MARS-IW in a Multiple Currency Environment

Charles J. Bodenstab

As distributors become involved in importing and exporting opportunities, the need to recognize different currencies becomes prevalent. The purpose of this paper, is to describe how the MARS-IW inventory management system can handle this requirement very effectively.

First of all, it is important to understand that there are only two, and only two areas in the MARS-IW system where the cost figure that is down-loaded from the host computer in utilized.

The first area has to do with the determination of the total cost of the order being built. In this case the solution is straight forward. The total cost is simply the total of the costs that were down-loaded, times the quantity being ordered. If the downloaded cost were in US dollars, the totals would be in US dollars. If the downloaded costs were in Yen, then the totals would be in Yen. Consequently, if the user is aware that the final order needs to be $120,000 Canadian, for example, and is aware that the down-loaded costs are in Canadian dollars, then, he or she, can simply use goal seeking on the cost field and drive for 120,000.

The only other place that the cost figure materializes is in the EOQ calculation. In this case the system utilizes the cost in the item file, in combination with the “ordering cost” (called the “C” or “K” cost) in the systems parameter file. (If you will recall this is the figure that is your indication of how much it costs to receive and put away the product in question.) These two numbers must be in the same currency or the calculation will make no sense. Consequently, at this point it would be necessary to change the “ordering cost” in the systems set-up file to match the currency of the vendor being considered prior to creating an order for that vendor.

While this requirement is not particularly burdensome it isn't as elegant as we would like. Accordingly, in a future release of MARS-IW the vendor file will be opened up to maintain a unique “C” costs by vendor. This feature will therefore allow the user to set the C cost in the same currency as the downloaded product cost. The optimum EOQ will then be properly calculated.

One by product of this feature, beyond the multiple currency issue, is that it will allow you to use different C costs by vendor to accommodate the fact that different vendors products may have significantly different put away costs. At Battery and Tire Warehouse, for example, we used 50 cents for all the vendors supplying accessory parts, and $1.00 for the battery and tire vendors.

One other area where you may think that the costs are an issue is in the “discount feature” where the system will determine the optimum buy based on the discount being offered by the vendor. Actually, it is not an issue in this calculation, since the cost figure cancels out of the equations. This happens because the cost impacts both sides of the economic issues equally.