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Customer Relationship Management
Setting up the forecast process - ideas for improvement © The Delos Partnership 2003
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Forecasting Needs a Simple Process
Capture Actual Filter Demand Compute forecast Review Accuracy Agree commercial plans Agree Exceptional demand Hold Demand Review Assumptions written down and agreed C O N S E N S U S F O R E C A S T © The Delos Partnership 2003
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Give Customer a promise
Demand Control Receive Order Check Forecast Check Abnormal Demand It was Not In the forecast Consume Forecast Check ATP Agree Lead time for Abnormal demand Give Customer a promise 100 % delivery to promise © The Delos Partnership 2003
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© The Delos Partnership 2003
Elements to decide Horizon Unit of Measure ‘Time Buckets’ Time Fences Level of Detail Item Family Capacity © The Delos Partnership 2003
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© The Delos Partnership 2003
Horizon A forecast provides visibility for Materials procurement Internal capacity requirements Short and long term financial projections Suppliers’ capacity requirements Horizon of forecast needs to give adequate visibility © The Delos Partnership 2003
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Horizon Covers All Needs
30 months rolling forecast Budget process 6 months gives likely outturn 24 months gives budget and forecast year Materials Capacity Cash © The Delos Partnership 2003
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Forecasting – Unit of Measure
Forecasting should be in unit of measure as sold to customer May need to be in aggregate where family volumes needed Issue – how to aggregate © The Delos Partnership 2003
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Forecasting - Time Bucket
Need to determine whether basic time interval is Month Week Day If monthly does it get divided into weeks If weekly does it get divided into days? If weekly or daily is each week or day going to be different © The Delos Partnership 2003
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© The Delos Partnership 2003
Item Level Forecast Part Number: Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: On Hand: 100 Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 30 40 16 24 32 Actual Demand Proj Avail Balance 90 70 65 45 15 50 42 26 25 Available to Promise Cumulative ATP Master Schedule 75 © The Delos Partnership 2003
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© The Delos Partnership 2003
Demand Time Fence Orders only EXECUTE MANAGE PLAN Add or subtract To capacity Strong Link to Integrated Enterprise Planning Process Release Orders Capacity and Materials “firm” Horizon Cumulative Lead Time © The Delos Partnership 2003
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Factors That Determine the Detail
Requirements for planning material and capacity Customer service policy Position in the supply chain Tradeoff between ‘precision’ and ‘accuracy’ Better to be roughly right than precisely wrong © The Delos Partnership 2003
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Customer Relationship Strategy
End item Forecast Family Forecast Distribute Where Do you meet The Customer ? Finish Capacity Forecast Sub-assemble Intermediate Manufacture Purchase Design To Order Stock © The Delos Partnership 2003
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End Item Level Forecast
Part Number: Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: On Hand: 100 Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 25 20 Actual Demand Proj Avail Balance 75 50 30 65 45 Available to Promise Cumulative ATP Master Schedule © The Delos Partnership 2003
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© The Delos Partnership 2003
Forecast Consumption Part Number: Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: On Hand: 100 Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 15 25 20 Actual Demand Proj Avail Balance 75 50 30 65 45 Available to Promise 90 Cumulative ATP Master Schedule © The Delos Partnership 2003
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© The Delos Partnership 2003
Customer Profile Customer X 50 per month Customer Y 10 per month Customer Z 5 per month Customers A… 35 per month Total = 100 per month Forecast at End Item Level © The Delos Partnership 2003
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© The Delos Partnership 2003
Forecast Consumption Part Number: Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: On Hand: 100 Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast Actual Demand Proj Avail Balance 75 50 25 30 65 45 Available to Promise 90 Cumulative ATP Master Schedule © The Delos Partnership 2003
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Forecasting Different Demand Streams
Allows control of demand by market segment or customer group or customer Prevents over-consumption by one market or sector Necessary when same product goes to different market sectors (e.G. Uk/export) © The Delos Partnership 2003
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Managing Multiple Demand Streams
In many companies multiple demand streams for the same item need to be managed (consumed) separately and ATP (available to promise) calculated separately © The Delos Partnership 2003
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Managing Multiple Demand Streams
Examples of Multiple Demand Streams Export and UK Different Market Sectors Retail/Industrial Spares/OEM Different Customer Groupings Major Accounts Minor Accounts Different Customers Large Customer A Large Customer B All other Customers Different Customer Categories Gold Card Silver Card © The Delos Partnership 2003
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Global Supply Chain Planning
Extension of make to stock environment Used when geography separates make from sell Allows for visibility in chain to maximise inventory control © The Delos Partnership 2003
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Global Supply Chain Planning
Same Product Code : Location code needed Bill of Distribution © The Delos Partnership 2003
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Distribution Planning Process
Capture Data Receive Forecast Calculate Plan Review Messages Transmit the plan Receive Supply Plan Hold Supply Review Review action messages BALANCED PLAN © The Delos Partnership 2003
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© The Delos Partnership 2003
Master Schedule UK Part Number: Lead Time: 2 periods Safety Stock: Min Ord Qty: 150 On Hand: 300 Location : UK Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 25 20 Warehouse Demand Actual Demand Proj Avail Balance Available to Promise Master Schedule 150 © The Delos Partnership 2003
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© The Delos Partnership 2003
Master Schedule - UK Part Number: Lead Time: 2 periods Safety Stock: Min Ord Qty: 150 On Hand: 300 Location : UK Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 25 20 Warehouse Demand 100 150 50 Actual Demand Proj Avail Balance 275 75 175 80 60 190 170 Available to Promise 125 Master Schedule © The Delos Partnership 2003
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© The Delos Partnership 2003
DRP - Germany Part Number: Lead Time: 2 periods Safety Stock: Min Ord Qty: On Hand: 80 Location : Germany Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 Actual Demand 15 Proj Avail Balance 60 40 100 80 Available to Promise 65 Master Schedule Planned Release © The Delos Partnership 2003
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© The Delos Partnership 2003
DRP Spain Part Number: Lead Time: 3 periods Safety Stock: Min Ord Qty: On Hand: 90 Location : Spain Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 40 Actual Demand Proj Avail Balance 50 160 120 80 190 150 110 70 180 140 Available to Promise Master Schedule * Planned Release * In Transit © The Delos Partnership 2003
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© The Delos Partnership 2003
DRP Italy Part Number: Lead Time: 3 periods Safety Stock: Min Ord Qty: On Hand: 70 Location : Italy Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast Actual Demand 20 Proj Avail Balance 50 40 30 60 Available to Promise Master Schedule Planned Release © The Delos Partnership 2003
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© The Delos Partnership 2003
CPR – Customer ABC Part Number: Lead Time: 2 periods Safety Stock: Min Ord Qty: On Hand: 80 Location : Customer ABC Periods 1 2 3 4 5 6 7 8 9 10 11 12 Forecast 20 Actual Demand 15 Proj Avail Balance 60 40 100 80 Available to Promise 65 Master Schedule Planned Release © The Delos Partnership 2003
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© The Delos Partnership 2003
Hierarchy of Forecast £ Plan £ Plan The higher the level The more accurate Production Family Marketing Family Production Sub Family Marketing Sub Family Item Number Item Number Customer/Distribution Centre © The Delos Partnership 2003
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© The Delos Partnership 2003
Product Variants Blue Pen Part Number 12346 Red Pen Part Number 12345 Black Pen Part Number 12347 Green Pen Part Number 12348 Variant Forecast Actual Blue 40 50 Red 60 70 Black 30 20 Green Total 200 How many Nibs And Caps and barrels Needed ? © The Delos Partnership 2003
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© The Delos Partnership 2003
Planning Family Pen Family 43785 Forecast = 200/mth Blue Option Part Number 12346 20 % = 0.2 Common Parts 46783 Red Option Part Number 12345 30 % = 0.3 100 % = 1.0 Black Option Part Number 12347 15 % = 0.15 Green Option Part Number 12348 35 % = 0.35 © The Delos Partnership 2003
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Modular Bill Works Best
If end item forecasting difficult or impossible because of number of items Manufacturing lead time exceeds competitive lead time © The Delos Partnership 2003
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Customer Relationship Strategy
Distribute Where Do you meet The Customer ? Finish Capacity Forecast Sub-assemble Intermediate Manufacture Purchase Design To Order Stock © The Delos Partnership 2003
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Work Centre Number : 41 Cum Lead Time : 6 periods Load Factor : 70%
Forecast of Capacity Work Centre Number : Cum Lead Time : 6 periods Load Factor : 70% Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 Forecast 42 56 Actual Demand 14 Proj Avail Balance Available to Promise Cumulative ATP 98 154 210 266 322 378 Master Schedule Order 1456 : Item units 1.1 hours per unit = 110 hours Order 1567 : Item units 1.2 hours per unit = 240 hours © The Delos Partnership 2003
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Establishing the Demand Management Process
Thought needed to be given to Horizon Level – planning bills, capacity or end item forecasting Time buckets Implementation of forecasting and DRP may require education of customer and agreement on key policies Benefits are: Reduced inventory Improved customer service Reduced effort in forecasting © The Delos Partnership 2003
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Cultural Issues to face
Why should I bother to take it seriously ? This is an operational issue; its nothing to do with Sales or Marketing Forecasting takes away time from selling I will spend a little time now, but much later Forecasts are best done by a system © The Delos Partnership 2003
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© The Delos Partnership 2003
PROJECT TEAM Project Organisation Sponsor INTEGRATED ENTERPRISE PLANNING STEERING COMMITTEE Project Leader FINANCE PERFORMANCE MEASURES I N O V A T S U P L Y D E M A N S U P O R T SALES FORECASTING DATA ACCURACY MASTER PRODUCTION SCHEDULING PROJECT MANAGEMENT LEAN AND AGILE LEAN AND AGILE PROCUREMENT CUSTOMER RELATIONSHIP MANAGEMENT SUPPLIER RELATIONSHIP MANAGEMENT © The Delos Partnership 2003
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© The Delos Partnership 2003
Task Team Role V I S O N D E T A I L K P S DETAILED ROLES TASK TEAMS CUSTOMER SERVICE C U L T R E DETAILED POLICIES AND PROCEDURES S T R A E G Y FORECASTING WORKING SOFTWARE © The Delos Partnership 2003
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© The Delos Partnership 2003
Task Teams Translate their element of the strategy and vision into reality Cross-functional Develop the policies and procedures that are needed Get familiar with the software, and make sure that this integrates with policy and procedures Develop the training material © The Delos Partnership 2003
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© The Delos Partnership 2003
Forecasting benefits What I forecast I know I can sell Forecasting is the only way of telling the supply side what to make or buy Forecasting better means more cash and more profit Forecasting better means less waste Having a forecast can mean telling the customer what they need ! © The Delos Partnership 2003
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Forecasting more accurately
Means Less Inventory Better Customer Service Reduced Cost Which means More Cash More Profit A competitive edge © The Delos Partnership 2003
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