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Forecasting and demand planning

  • 1.  Forecasting and demand planning

    Posted Dec 13, 2018 07:11 PM
    We have a pretty straightforward model, we buy finished goods, and sell finished goods. We're actually MUCH more complex than that, but production is not a major part of our business.

    However, with long lead times due to most of our products being sourced in other countries, know when and how much to order is more then a full time job. We're looking for a solution that can look at our historical sales, and with some guidance from account managers, help us know when and how much to order and where to put it. The goal obviously is to decrease storage of product.

    We've been looking at Demand Works and Halo BI as 2 of the solutions.

    Does anyone have any other solutions?  Does anyone have any experience with either of these 2 solutions and have any thoughts they would be willing to share?

    Thanks!
    Sean

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    Sean Shasteen
    The Fishin' Company
    sean@fishinco.com
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    Academy - Online Interactive Learning from Experts


  • 2.  RE: Forecasting and demand planning

    SILVER CONTRIBUTOR
    Posted Dec 14, 2018 08:34 AM
    We also have a lot of long lead time items from overseas. We are in the process of implementing the results of an ABC-XYZ analysis of our items along with calculated safety stock and EOQs. Planning policies and parameters can then be set accordingly.

    If you are interested, send me a private message and I will elaborate further.

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    Brian Kooshian
    OMT Veyhl
    Holland MI
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    Academy - Online Interactive Learning from Experts


  • 3.  RE: Forecasting and demand planning

    Posted Dec 14, 2018 12:00 PM
    Hello,

    We use Forecast X by John Galt which is an EXCEL add in (cost is pretty minimal in terms of forecasting software). If your business doesn't require a lot of inputs and/or if you have a good amount of historical data, this might be a good option for you. We query sales out of NAV and then let Forecast X run statistical forecasting in EXCEL. After we massage the suggested forecast, we then import the final numbers back into NAV and the planning functions use that data to suggest orders.

    Feel free to reach out if you would like any more info.

    Thanks,

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    Gina Lopez
    Demand Planner
    GU Energy Labs
    Berkeley CA
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    Academy - Online Interactive Learning from Experts


  • 4.  RE: Forecasting and demand planning

    SILVER CONTRIBUTOR
    Posted Dec 14, 2018 02:30 PM
    We have experienced a similar problem.  We sell baseball and softball sporting goods, and by the time we are "out", it is too late to reorder because the season would end before the product will arrive (3-5 month lead times).  We developed an in-house ordering tool using Jet Reports in Excel and forecasts submitted from different sales channels.  We recently purchased Demand Planning from Lanham, and I believe that it will be helpful as a guide, but because we have new products launching and old products getting replaced every year or two, it's very difficult to use historicals for all items.  We also have unique sales channels (big box and organizational sales) who dictate what they will buy each year based on factors outside of our control, so for those channels we will typically use collaborative forecasts.  I would recommend that you have a clear strategy for purchasing as a starting point.  We divided our A, B, and C items based on quantity and dollar sales thresholds.  We decided on a number of days of safety stock for each category, and then we purchase for lead time + safety stock time.  For items with low forecasts, we have a safety stock quantity as well.  Good luck!

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    Angela Dunnahoe
    Marucci Sports
    Baton Rouge LA
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    Academy - Online Interactive Learning from Experts


  • 5.  RE: Forecasting and demand planning

    SILVER CONTRIBUTOR
    Posted Dec 14, 2018 03:45 PM
    Lanham's Demand Planning solution can help no matter if you have production or not. We have a number of customers that have long lead times. I am sure @Cliff McDaniel or @KatieFarrell (or any of our customers) would be happy to discuss our solution with you.

    I've also included a link to a fact sheet and I'd be happy to schedule a demo if you'd like:


    Let us know if there is anything we can do to help. Best of luck with your Demand Planning search!

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    Kate Pinyan
    Marketing and Business Development
    Lanham Associates/Lanham Services
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    Academy - Online Interactive Learning from Experts


  • 6.  RE: Forecasting and demand planning

    Posted Dec 17, 2018 12:28 PM
    ​Hello Sean! This is a great question. I highly recommend Demand Planning from Lanham (formerly known as AFP or Advanced Forecasting and Procurement). Their basic model is an equation called the Lead Time Horizon (LTH) which is lead time (days from purchase to days received in your warehouse) + Safety Stock (days) + Review Cycle (how often you want to place orders in days- example is every week is 7 days or monthly is 30). If you know your monthly average, divide by the days in the month for your daily average and purchase your inventory based on the LTH. You can start using this equation for your best selling products to prove its usefulness. Forecasting A items are easy but determining sporadic item replenishment, warehouse inventory control for multiple locations, and planning for things like Chinese New Year delays are much more difficult. Demand Planning really shines in these areas and over the last two years our inventory has shifted from mostly surplus and excess to the majority of inventory only within my LTH. Let me know if you have any questions, I am happy to help!

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    Katie Farrell
    Supply Chain Manager
    Pacific Bag, Inc
    Woodinville, WA
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    Academy - Online Interactive Learning from Experts


  • 7.  RE: Forecasting and demand planning

    SILVER CONTRIBUTOR
    Posted 22 days ago

    Statistical forecasting methods are an important part of the solution. They let you squeeze as much advantage as possible from the historical patterns of demand your company has recorded for each item. The job of forecasts is to describe what is typical, which provides the base on which to cope with randomness in demand. Statistical forecasting techniques work by finding "big picture" features in demand records, such as trend and seasonality, then projecting those into the future. They all implicitly assume that whatever patterns exist now will persist, so 5% growth will continue, and July demand will always be 20% higher than February demand. To get to that point, statistical forecasting methods use some form of averaging to smother the "noise" in the demand history.

    But then the rest of the job falls on inventory management, because the atypical, random component of future demand will still be a hassle in the future. This inevitable level of uncertainty has to be handled by the "shock-absorber" called safety stock.

    The same methods that produce forecasts of trend and/or seasonality can be used to estimate the amount of forecast error. This has to be done carefully using a method called "holdout analysis".  It works like this. Suppose you have 365 observations of daily demand for Item X, which has a replenishment lead time of 10 days. You want to know how many units will be demanded over some future 10-day period. You might input the first 305 days of demand history into the forecasting technique and get forecasts for the next 10 days, days 306-315.

    The answer gives you one estimate of the 10-day total demand. Importantly, it also gives you one estimate of the variability around that forecast, i.e., the forecast error, the difference between what actually happened in days 306-315 and what was forecasted. Now you can repeat the process, this time using the first 306 days to forecast the next 10, the first 307 days to forecast the next 10, etc. You end up with 52 honest estimates of the variability of total demand over a 10-day lead time. Suppose 95% of those estimates are less than 28 units. Then 28 units would be a pretty safe safety stock to add to the forecast, since you will run into shortages only 5% of the time.

    Smart IP&O https://smartcorp.com/  does these calculations automatically. Check the Smart add-on for Dynamics. https://smartcorp.com/dynamics-ax-and-nav/  It can ease at least one of the chronic headaches of inventory management by helping you cope with demand variability.  



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    Xabier Lizartzategi
    Marketing Director
    Smart Software, Inc
    Belmont MA
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    Academy - Online Interactive Learning from Experts


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