Search Results for: supply-planning

… which can be obtained from volume discounts, is quite frequently covered in books on procurement. Suppliers most often publish these volume prices. Short lead-time orders, on the other hand, are not published, and in textbooks which often tend to assume that companies don’t have problems forecasting or performing supply planning. Therefore, the procurement premium paid by businesses tends to be greatly under-emphasized.
Regarding the exact mechanism for procurement premium — the premium comes from two directions. The first is that the costs are higher for suppliers when they receive short lead-time orders. They may have to adjust …

… the costs of doing one of the other are a bit closer so that the costs can be traded off. At an 80 to 1 ratio, these values cannot be traded off.
This problem faces other areas of supply chain planning, most notably when a cost optimizer is used for supply planning. This is because a supply planning cost optimizer requires estimating penalty costs that can be traded off against specific costs like inventory and production costs.
As explained in this article, many cost optimization projects have such a high value set for the expense of lost sales that it …

… history I can quite significantly improve forecast accuracy — and without doing that much work. Of course, companies that contact me know they have predicted problems — so my sample is admittedly skewed. However, even on projects where I am not there to improve forecast accuracy (for instance I am there for supply planning or production planning), I hear the same types of issues and the same dissatisfaction with the projection.
Example of Cost of Forecasting
For example, there is a list of things that all companies should be doing on forecasting, which is frequently not done. Examples of these things are …