“Offer to our customers, a Comprehensive and Effective Planning Solution dedicated to Supply Chain Excellence, benefiting from our 27 years of expertise.” The Mission of DynaSys Introduction to DynaSys
An Industry Supply Chain Introduction Physical Supply Chain Information Supply Chain Natural Resources SuppliersProductionDistributionRetailConsumers
An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend. APICS Dictionary What is a Forecast? Introduction
4 Components of Demand Trend New! Cyclical Random New Product Follows Economy Seasonal Daily (fast food) Annually (snow plows) Mature Product Outlier
Forecasts Are More Accurate When Aggregated Introduction How Many Brown, Size 10 Shoes Will We Sell Thursday? Not Very Accurate – Just a Wild Guess How Many Shoes Will We Sell This Month? Better Chance Of Being Accurate – Can Use Data
Forecasts Become Less Accurate With Time Introduction
To Improve Forecast Accuracy, Involve Your Customers & Major Stakeholders Introduction
17 Sr. Managers Meet To Discuss Forecasting Introduction
18 “We have 42,000 SKU’s and a limited budget for personnel to do forecasting. How do we get the most bang for the buck??” “Sales, Marketing & Demand Planning all think they are better at forecasting promotions. Who is right?” “My old company kept 2 weeks of Safety Stock on hand for each item. Isn’t that enough?” “Which products are behind budget?” “The forecast is always wrong, why bother?” Senior Management Discussion Overheard… Introduction
19 “The Forecast Is Always Wrong, Why Bother?” Senior Management Overheard….
Forecasting Rule #1 Why Forecast? The Forecast Is WRONG
To anticipate change -Promotions -New products -Product retirements -Customer buying habits To anticipate inventory and capacity demands To procure materials in a timely manner To project costs of operations into budgeting processes & manage cash flow Why Forecast?
22 The Quandary Why Forecast? Overseas Supplier Supplier Lead Time Item Scanned Delivery Expected Customer Lead Time East Coast DC
Often have employees that work overtime for months, followed by layoffs Are poor users of manufacturing capacity Are unable to fulfill “surprise” customer orders Face huge expediting charges Have excessive inventory write-offs Have the dreaded combination of a poor customer service level and too much inventory! Disappoint customers by not responding to promotions on time Companies That Do Not Adequately Forecast: Why Forecast?
Out of Stock Rates Double on Promoted Items Introduction Source: Stax, Inc. Store Audits Average On-Shelf Availability Levels
Value Proposition and ROI Reduced costs -Inventory reductions 8-10% in 6 months, 12-70% over 2-3 yrs -Reduced obsolescence and inventory write-offs 30-50% -Total cost reductions 1-2% Improved Performance -On-time delivery to customers improvement 10-40% -Plant efficiency improved between 2 and 33% -Improvement in forecast accuracy – 5-20% -Improved profitability 1-3% Source: IIF and other industry sources 25 Why Forecast?
26 “We have 42,000 SKU’s and a limited budget for personnel in forecasting. How do we get the most bang for the buck??” Senior Management Overheard….
27 Isolating importation errors Identification of items behaving badly Identification and correction of historical anomalies Superior Forecast Engine ABC Analysis to separate the critical from the trivial Multi-level forecasting DP 7.0 Answers…. Overcoming Limited Resources
Statistical Forecasting Interface QAD Demand Planning 7.0 ShortcutsShortcuts Collaborative Messages Excel Like Grid Graphs ControlsControls
30 When importing data, problems can occur DP 7.0 makes it easy to identify problems that the user can fix DP 7.0 automatically highlights items with high forecast error – major time saver Importation & Correction Introduction
31 1.Click items without standard cost 2.Select Unit Conversion Issues 3.The list of 30 items appears Fix a problem once, & it is fixed permanently Identifying Import Problems Isolating Importation Errors 1 2 3
33 Identification Of Items Behaving Badly Overcoming Limited Resources
34 Last Month’s Alerts Highlight Forecast Problems Identification of Items Behaving Badly Last Month’s Forecast Was Very Wrong – User Should Review
35 Modifying Alert Parameters Identification of Items Behaving Badly Deviation Gap set at 10% will generate no alert Change Deviation Gap to 5% generates an alert
36 Identification And Correction Of Historical Anomalies Overcoming Limited Resources
37 Forecasts are built on pattern recognition What if your sales history included: -Extraordinary demand caused by a competitor’s stockouts? -A weather driven surge or absence of demand? -A drop in orders caused by your prolonged stockout? -Would you want the future to reflect that past? DP 7.0 provides statistical boundaries that help identify these anomalies, allowing you to accept or modify them Why Modify History? Identification & Correction of Historical Anomalies
38 Outliers In Sales History Identification & Correction of Historical Anomalies
39 Options for Outliers Identification & Correction of Historical Anomalies A. Item looks suspicious B. Modify history C. Accept history Actual History Modified History Suspicious Quantity Validation Modification
40 Superior Forecast Engine Overcoming Limited Resources
Method used to select the “best fit” time series forecasting techniques for your data Judged to be one of the most accurate in the world There are over 30 other forecasting methods available including: -Curve Fitting -Exponential Smoothing -Regression -New Product -Lifecycle One size DOES NOT fit all! Forecast Pro Superior Forecast Engine
42 ABC Analysis To Separate The Critical From The Trivial Overcoming Limited Resources
First noted by Vilfredo Pareto Items are classified as: -A items (fastest movers) 20% = 80% of sales or usage -B items (middle-range movers) 30% = 15% of sales or usage -C items (slow movers) 50% = 5% of sales Focus on fast moving items Useful in many applications -In forecasting, where we want to keep our attention ABC Inventory Management ABC Analysis To Separate The Critical From The Trivial
44 Tighter Alert Parameters For “A” Items ABC Analysis To Separate The Critical From The Trivial Deviation Gap set at 10% will generate no alert Change Deviation Gap to 5% generates an alert
ABC Classification ABC Analysis To Separate The Critical From The Trivial A=80%
ABC Classification ABC Analysis To Separate The Critical From The Trivial A=60%
59 Each collaborator inputs their forecast A predefined hierarchy determines which forecast has precedence in determining the final forecast All forecasts are stored in the system After the promotion the system can determine which of the forecasts was the most accurate When Forecasting Promotions Forecasting Promotions
60 “My Old Company Kept 2 Weeks Of Safety Stock On Hand For Each Item. Isn’t That Enough?” Senior Management Overheard….
How Do You Determine Safety Stock Levels? Based on producing 1 months average sales and the “2 Week Safety Stock” philosophy, is the amount of inventory appropriate? Could it be improved? 61 Calculating Safety Stock Production Qty = 1 Month Average Safety Stock = 2 Weeks
How Do You Determine Safety Stock Levels? Like the previous example, the forecast & actual totaled 600 for six months Based on producing 1 months average sales and the “2 Week Safety Stock” philosophy, is the amount of inventory appropriate? Could it be improved? 62 Calculating Production Qty = 1 Month Average Safety Stock = 2 Weeks
How Do You Determine Safety Stock Levels? The best way to calculate safety stock is based on: -Forecast accuracy -Desired service level -Lead time 63 Calculating Safety Stock
Impact of Desired Service Level 65 Calculating Safety Stock
Impact of Differing Lead Times 66 Calculating Safety Stock
Replace Safety Stock In EA 67 Calculating Safety Stock Current Safety Stock imported from EA EA Safety Stock compared to Calculated Safety Stock After reviewing the computed Safety Stock levels, you can have them exported back to EA, or you can ignore them Calculated Safety Stock Current Safety Stock In EA
69 Why EOB? Easy On Boarding DP 7.0 Configurability Strength Can adapt to almost every business process Can be fine tuned to suit user requirements DP 7.0 Configurability Weakness Complex Longer setup time Higher learning curve for customer
70 DP 7.0 is a highly configurable tool -EOB is designed to meet 90% of customer requirements “out of the box” -Reduces implementation time -Speeds the process of the customer getting value from the software EOB is a preconfigured database that includes: -Hierarchies mapped to QAD EA -Standard import / export with QAD EA -Standardized process & parameters -Standardized screens -Standardized KPI’s What is EOB? Easy On Boarding