Search Results for: inventory-optimization

  • Comments on Brightwork Articles on DDMRP

    ByPrimary Researcher

    … a minimal amount of effort that can go into the maintenance of the forecasting system. I covered this topic in detail in the following article Complex Versus Simple Forecasting Methods. This is a concept promoted by strong evidence by Armstrong in his excellent book Principles of Forecasting 2001.
    Example 2: Inventory Optimization and Multi-echelon (MEIO) is more mathematically sophisticated than MRP. There is nothing in MRP beyond arithmetic (the procedure itself, not the parameters). MEIO can build inventory to match a service level (the inventory optimization mathematics), and it is aware of the stocking position of locations around it …

  • Is DDMRP Multiechelon Software?

    ByPrimary Researcher

    … with supply chains as they are multi echelon by their nature. However, the ability to intelligently plan around the interactive location component is a specific subcategory of supply planning software with unique multi echelon mathematics.
    We cover this mathematics and the outcome for supply planning. How to Understand Multi Echelon Inventory Optimization Best.
    DDI’s Misuse of the Term Lead Time for Lead Time Reduction
    One of the problems comes when the DDI uses the term decouple to mean shrink supplier lead times — which is not actually shrinking the supplier lead time. DDMRP does this by inserting more inventory. Naturally …

  • How is DDMRP Buffer Stock Different from Safety Stock?

    ByPrimary Researcher

    … add to this unnecessary confusion, there was already a term available to describe this exact thing, which is referred to as effective lead time, which I cover in the article How to Understand Effective Lead Time Better. I am not sure who first coined the term effective lead time, but inventory optimization and multi-echelon software vendors popularized it. Effective lead time is the lead time that the customer perceives. It is conditional and depends upon stocking and delivery conditions given a particular scenario. If, for instance, a store is out of stock of an item, the effective lead time …

  • How Convincing is the MIT DDMRP Study?

    ByPrimary Researcher

    … APS systems have been quite problematic, with most cost optimization projects (so APS) underperforming MRP. Heuristics for supply planning essentially emulate MRP, and allocation is only applicable for companies, such as high tech, where order allocation is required. However, allocation is not particularly logical or intelligent. As for multi-echelon inventory optimization, the results have been generally poor as the applications are considered too challenging to implement. My experience indicates that most APS implementations did no pay back their investments.
    Is Conventional Planning Obsolete?
    Ptak & Smith (2011) stated that the hypotheses and rules used to design ‘conventional planning’ were no …

  • How Did DDMRP Convert So Many Vendors?

    ByPrimary Researcher

    … plans multi-echelon networks, but that does not mean the method is multi-echelon. When software is called multi-echelon, it means something specific. For example, MRP and cost optimization software plans networks that are multi-echelon, but the software is also not multi-echelon. For more, see my book Inventory Optimization and Multi-Echelon Planning Software.
    DDI uses this same terminology.
    Demand Driven Material Requirements Planning is a formal multi-echelon planning and execution method to protect and promote the flow of relevant information through the establishment and management of strategically placed decoupling point stock buffers. – DDI
    It is …

  • When Should a Company Use ERP Best Practices Versus Custom Code?

    ByPrimary Researcher

    … that one particular functionality is a best practice.
    This type of thinking seems to work in an executive setting or during a sales presentation, but has no basis or place in researching systems.
    Let us take a look at a “good practice.” The method of planning a supply network called inventory optimization and multi-echelon planning (MEIO). This is an advanced way of planning a network that is based upon service levels. It is the most sophisticated method of planning that is used in this category. So is it a “best practice.” Well, in actual implementation, MEIO systems have proven …

  • How to Achieve Lean Supply Chain

    ByPrimary Researcher

    … thought. The trick is determining which segments of the product location database should go out on which school of thought.
    A significant difference between Lean and MRP or, more accurately, Lean versus procedural-based supply and production planning primarily has to do with the replenishment trigger. Supply and production planning procedures such as MRP, heuristics, allocation, cost optimization, and inventory optimization work off projections, while Lean replenishment works off an immediate need. This is often the case, as there are some reorder points that are calculated based on projections.
    Reorder points can be calculated in several ways. For instance …

  • What is SAP IBP?

    ByPrimary Researcher

    … management. The real-time part of supply chain management is doing things like expediting or processing recommendations.
    Powered by in-memory computing technology within SAP HANA, the SAP Integrated Business Planning for Supply Chain (SAP IBP for Supply Chain) solution supports sales and operations; demand, response, and supply planning; and inventory optimization.
    HANA powers IBP. However, there is no reason why this should do much for the performance of IBP or set it apart from other systems. HANA is optimized for analytics performance, but even here, there is no evidence that HANA outperforms competing databases.
    Cloud deployment
    Probably not.
    When …

  • When Can EOQ Be Implemented?

    ByPrimary Researcher

    … threshold for mathematically determining when a product location combination should be placed on a forecast based planning approach like MRP and when it should be placed on a non-forecast based approach is a bit more involved. And is something we cover in the article How to Understand Segmentation Versus Inventory Optimization.
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    Conclusion
    EOQ can be created in a customized fashion. It is not necessary to use the standard EOQ formula, and in many cases, it is not a good idea to use just the standard EOQ formula. Accepting the EOQ as provided with applications is that …

  • How Does Reorder Point Work in SAP?

    ByPrimary Researcher

    … planning methods, or they can be used to control the supply plan without any of the methods exclusively. However, when used solely to control the supply plan, the company is said to be performing reorder point planning instead of forecast-based planning. MRP/DRP and APS (heuristic, allocation, cost optimization, inventory optimization) methods are forecast-based planning.
    And it comes down to the forecastability of the product location combination. If the forecast is of reasonable accuracy, then MRP can be used. If the forecast is high in error, and cannot be improved much beyond this error, then a reorder point …