Search Results for: forecasting

  • How Convincing is the MIT DDMRP Study?

    ByPrimary Researcher

    … companies’ poor state of affairs. However, he seemed to be referring to smaller companies that did not have automated planning systems of any kind. But my observation is that measuring MRP and forecasting systems that have extensive underinvestment will not tell you much about how effective the methods are. If, for example, you want to critique the effectiveness of hand gliding equipment, you can’t learn this by measuring the outcome of taking out a hang glider that was never maintained and with a pilot who has never taken a class in hang gliding. Observing that the pilot crashed …

  • How Did DDMRP Convert So Many Vendors?

    ByPrimary Researcher

    … more general point, using forecasts does not make the system “more susceptible” and non-forecast-based planning “less susceptible.” Secondly, MRP does not have to use 100% forecast-based planning. MRP can be set to reorder point for items with a high forecast error where there is little benefit from forecasting, as we cover in the article How to Access Forecast Forecastability Measurement.
    If a product location has a low error, not using forecasting increases the bullwhip effect.
    Let us take a simple example.
    If a forecast has a seasonal pattern that is highly forecastable — would using a reorder point …

  • Extracting Meaning from Diginomica's Interview with SAP CEO Christian Klein

    ByPrimary Researcher

    … few underdeveloped supply chain procedures contained with it called MRP and DRP (like nearly all ERP systems, by the way). SAP’s APO has generally failed to meet expectations. IBP, APO’s pseudo replacement (replacing some parts, but not others), has also so far been disappointing and offers little advantages over Excel with some custom development once all costs and efforts are taken into account. 
    But secondly, some of the requirements or requests from customers are not sufficiently specific for me to make sense from them. Demand plans may change day to day, but forecasting systems, including DP (although not

  • How to Achieve Lean Supply Chain

    ByPrimary Researcher

    … available to them. Therefore it is just a matter of knowing which functionality to apply to which product location combinations.
    Intermittent – or “lumpy” – demand is one of the most common features of a product’s demand history that makes a product unforecastable. Unfortunately, as is covered in the book Promotion Forecasting: Techniques of Forecast Adjustment in Software, many factors are combined to reduce product databases’ forecastability. This includes the increase in the number of SKUs carried – called product proliferation, reduced product lifecycles and higher turnover, and increases in promotions. The less forecastable the product database, the less than an MRP …

  • When to Use Lean or Reorder Point Planning Versus MRP

    ByPrimary Researcher

    … perform so much better than the industry average. I covered Trader Joe’s in my first forecasting book, Supply Chain Forecasting Software.
    A fundamental principle of Lean is smooth production. This is referred to as Heijunka, and the approach to smoothing production through scheduling is called the Heijunka Box, which is one factor in when to use Lean versus MRP. One of the “Seven Zeros” described by Edward Deming and outlines the ideal production environment is Zero Surging. However, Sales and Marketing are destroying the Heijunka! This is because of their insistence on having the company carry so many …

  • When to Use Reorder Point Planning

    ByPrimary Researcher

    … However, for most companies, some portion of the product database cannot be reliably forecasted. Thus, forecasts are emphasized by demand planning for some product location combinations that add no value to the supply planning process.
    Specifically, not all product location combinations can have their forecast improved by a more complex forecasting method (which is the continual hope of many) than a simple long-horizon moving average resulting in a level forecast. This applies equally to very stable products, as they also will use a level forecast. Reorder point planning for the finished good (as the associated finished and raw material …

  • How to Implement Lean Supply Chain

    ByPrimary Researcher

    … that this places on the supply chain. I find it strange that Lean proponents have taken such a narrow view of variability and have not been aggressive in admonishing Sales and Marketing to make the overall supply chain more sustainable by lowering product proliferation.
    Issue #2: The Feasibility of Not Forecasting
    This is not possible for most clients and in most situations. For this to work, the replenishment lead-time must be shorter than the lead-times between the customer’s order and the expected delivery date. If most companies were to move away from forecasting and wait until sales …

  • What is Lean Supply Chain Definition?

    ByPrimary Researcher

    … entail either reducing the variability or placing buffers closest to the point of variability. (Reducing variability may mean switching to a more reliable transportation company that delivers consistently. Adding a buffer would mean keeping sufficient inventory at the receiving location to account for the inconsistency of the delivery company.)
    Not Forecasting: Rather than performing forecasting, the supply chain should instead be reactive and only carry a minimal amount of inventory. This can be accomplished by reorder point planning, and minimal list can be achieved by how the reorder point (either duration or quantity) is set.

    What is the Core of …

  • What is SAP IBP?

    ByPrimary Researcher

    … To do this, IBP would have to know the incremental sales from different sales levels, and there is no way for IBP to know this.
    Get full demand transparency with short-term, mid-term, and long-term forecasting. Take advantage of best-in-class capabilities for demand sensing and statistical forecasting.
    Demand sensing is not a real thing but is a way of falsifying forecast error, as we cover in the article How to Understand Demand Sensing and Demand Shaping Best.
    In terms of statistical forecasting, IBP is just offering the same statistical forecasting everyone else is — there is nothing …

  • How Does Reorder Point Work in SAP?

    ByPrimary Researcher

    … forecasting program. The system determines the forecast values for future requirements by means of historical data. From these forecast values, the system then calculates the reorder level and the safety stock level, taking the service level, which is specified by the MRP controller, and the material’s replenishment lead time into account. The system then records these two values in the appropriate material master record. Since the forecast is carried out at regular intervals, the reorder level and the safety stock level are continually adapted to the current consumption and delivery situation. This means that a contribution is made …