
45 True/False questions
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Forecasting Accuracy → Forecast is the specific definition of what is projected to be sold, when and where
Forecasting is a critical capability
Many logistics and supply chain activities must be completed in anticipation of a sale
Forecasting approaches to achieve:
-enhanced service or reduced inventory
Improve forecast accuracy
Forecast at a higher level of aggregation -
Forecasts must be more timely and accurate to align → Customer demands for higher service levels and more product variations with
A management focus to reduce supply chain assets -
Trend Component → is long-range shift in periodic sales
Positive, negative or neutral -
Logistics Forecasts are Necessary To... → Support collaborative planning
-Collaborative forecasts help avoid inventory
excesses and out-of-stock situations
Drive requirements planning to determine
-Inventory projections
-Replenishment requirements
-Production requirements
Improve resource management through cost trade-offs of strategies such as
-Extra production capacity
-Extra storage capacity -
Period demand equation → Demand management system is the information technology component of the sales and operations planning (S&OP) process
Demand management develops the forecasts used by other supply chain processes to anticipate sales levels
Forecasts are then used to determine production and inventory requirements
Must maintain forecast data consistency across multiple products and warehouse facilities -
Base Demand → consists of order generation, and order fulfillment.
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CPFR Process Steps → 1.)Develop a joint business plan
2.)Create a joint calendar to determine product flow
3.)Create a common sales forecast based on shared knowledge of each trading partner's plan
-Share common forecast between retailer and
suppliers
-Use an iterative process to share the forecast and
requirements plan
4.)Use the common sales forecast to develop
-Production plan
-Replenishment plan
-Shipment plan -
Irregular Component → is long-range shift in periodic sales
Positive, negative or neutral -
Evaluating Applicability of Forecasting Techniques → relies on expert opinion and special information
Costly and time-consuming
Ideal for situations with little historical data or when much managerial judgment are required
Developed using surveys, panels and consensus meetings -
Forecast Challenges → -A meaningful forecast process requires integrated and consistent combination of components
Faulty communications are costly for supply chains
-Seek to reduce forecast inconsistency across
multiple members of the supply chain
Efforts to perfect a single component do not overcome need for other components
Process design should consider strengths and weaknesses of each individual component
-Design for optimal performance of the overall
integrated system -
Demand Planning - Potential Issues / Watch-Outs → Historical forecasts
Promotional plans
Pricing changes
New product introductions -
Collaborative Planning, Forecasting and Replenishment → Overcomes these problems resulting from individual perspectives
Limited economies of scale
Limited information sharing
Excessive transportation expense -
Demand & Supply Management → Demand management system is the information technology component of the sales and operations planning (S&OP) process
Demand management develops the forecasts used by other supply chain processes to anticipate sales levels
Forecasts are then used to determine production and inventory requirements
Must maintain forecast data consistency across multiple products and warehouse facilities -
Forecast Techniques → Moving average -- weighted average previous period sales
Exponential smoothing -- WEIGHTED MOVING AVERAGE using smoothing constraints
Regression -- Time period as the independent variable
Time series -- Other independent variables such as price, promotion plans
Multivariate -- Complex statistical techniques -
Qualitative forecast techniques → uses specific information to develop relationships between lead events and forecasted activity
e.g., simple or multiple regression -
Cyclic Component → is long-range shift in periodic sales
Positive, negative or neutral -
Supply Chain Planning → Plan
Source
Make
Deliver
Return -
Analysis: → consists of order generation, and order fulfillment.
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Basic planning formula → Demand management system is the information technology component of the sales and operations planning (S&OP) process
Demand management develops the forecasts used by other supply chain processes to anticipate sales levels
Forecasts are then used to determine production and inventory requirements
Must maintain forecast data consistency across multiple products and warehouse facilities -
Forecasting → Forecast is the specific definition of what is projected to be sold, when and where
Forecasting is a critical capability
Many logistics and supply chain activities must be completed in anticipation of a sale
Forecasting approaches to achieve:
-enhanced service or reduced inventory
Improve forecast accuracy
Forecast at a higher level of aggregation -
Annual Business Planning → Strategic planning starts the process - 3-5 year horizon
Integrated Operations Planning - Deliver the plan!
Monitor, control, adjust for actual variance from plan -
8 Keys to Successful S&OP Implementation → These applications can be sourced from the following options
-Custom developed for the organization
-Packaged solutions contained in a larger supply chain management system
-Modules within an ERP system -
Production planning systems match → Production planning uses requirements from demand management to develop a realistic supply plan
Must integrate with manufacturing (and 3rd party) resources and constraints
-Requirements plan defines what items are needed and when
-Effective planning creates a time-sequenced plan -
Execution: → Forecast is the specific definition of what is projected to be sold, when and where
Forecasting is a critical capability
Many logistics and supply chain activities must be completed in anticipation of a sale
Forecasting approaches to achieve:
-enhanced service or reduced inventory
Improve forecast accuracy
Forecast at a higher level of aggregation -
Forecasting Requirements → -Improving accuracy of forecasts requires error measurement followed by analysis
-Choice of method for error measurement
Simple average error can hide problems as positive errors are offset by negative ones
Mean Absolute Deviation (MAD) evaluates absolute error by ignoring the sign of the error
Mean Absolute Percentage Error (MAPE) is mean MAD divided by mean demand -
Forecast for time T → -A meaningful forecast process requires integrated and consistent combination of components
Faulty communications are costly for supply chains
-Seek to reduce forecast inconsistency across
multiple members of the supply chain
Efforts to perfect a single component do not overcome need for other components
Process design should consider strengths and weaknesses of each individual component
-Design for optimal performance of the overall
integrated system -
Production Planning → Production planning uses requirements from demand management to develop a realistic supply plan
Must integrate with manufacturing (and 3rd party) resources and constraints
-Requirements plan defines what items are needed and when
-Effective planning creates a time-sequenced plan -
Forecast Process → -A meaningful forecast process requires integrated and consistent combination of components
Faulty communications are costly for supply chains
-Seek to reduce forecast inconsistency across
multiple members of the supply chain
Efforts to perfect a single component do not overcome need for other components
Process design should consider strengths and weaknesses of each individual component
-Design for optimal performance of the overall
integrated system -
Demand management processes must integrate → : consists of sales forecasting, order planning/forecasting, inventory positions, and transit lead times.
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Sourcing software applications → These applications can be sourced from the following options
-Custom developed for the organization
-Packaged solutions contained in a larger supply chain management system
-Modules within an ERP system -
Logistics planning integrates overall → movement demand, vehicle availability, and relevant movement cost into a decision support system that seeks to minimize overall freight expense
-Analysis suggests ways freight can be shifted among carriers or consolidated to lower expenses -
Benefits of Integrated Operations Planning → Strategic planning starts the process - 3-5 year horizon
Integrated Operations Planning - Deliver the plan!
Monitor, control, adjust for actual variance from plan -
Perod logistics requirements equation → Forecasts+Customer orders + promotions
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Benefits of CFPR - Five Major Categories → Improved Customer Service Through Better Forecasting Techniques
Lower Inventories for Higher Profits
Improved ROI on Technology Investment
Improved Relationships Between Trading Partners
Cost Reduction -
Time series forecast techniques → focuses entirely on historical patterns and pattern changes to generate forecasts
"The past is a good predictor of the future"
e.g., moving averages, exponential smoothing, extended smoothing, and adaptive smoothing -
Logistics Planning & Inventory Deployment → movement demand, vehicle availability, and relevant movement cost into a decision support system that seeks to minimize overall freight expense
-Analysis suggests ways freight can be shifted among carriers or consolidated to lower expenses -
Making S&OP Work in an Organization Requires Senior Leadership Involvement → -Organizational processes
-Personal responsibility and accountability
-Information systems (financial, marketing and supply chain planning)
Using this S&OP combination, the operations and sales groups must overcome conflicts to develop consensus and then execute their collaborative plans
Finance also plays a key role in dollarizing the impact of decisions -
Sales & operations planning is an integrated combination of → -Organizational processes
-Personal responsibility and accountability
-Information systems (financial, marketing and supply chain planning)
Using this S&OP combination, the operations and sales groups must overcome conflicts to develop consensus and then execute their collaborative plans
Finance also plays a key role in dollarizing the impact of decisions -
Demand Planning → Production planning uses requirements from demand management to develop a realistic supply plan
Must integrate with manufacturing (and 3rd party) resources and constraints
-Requirements plan defines what items are needed and when
-Effective planning creates a time-sequenced plan -
Strategy & Planning: → establishes the ground rules for the collaborative relationship
Business goals
Scope of collaboration and assignment of roles
Responsibilities
Checkpoints / milestones
Escalation procedures -
Promotional Component → is annual recurring upward or downward movement in demand
e.g. Toy demand before Christmas -
Seasonal Component → is annual recurring upward or downward movement in demand
e.g. Toy demand before Christmas -
Causal forecast techniques → uses specific information to develop relationships between lead events and forecasted activity
e.g., simple or multiple regression -
Common software applications for most planning environments include: → CFPR is a business model that takes a holistic approach to supply chain management and combines the intelligence of multiple trading partners in planning and fulfilling customer demand by using common metrics, language and firm agreements to improve efficiency for all participants.
CFPR links sales and marketing best practices - category management, supply chain planning and execution processes to increase availability while reducing inventory, merchandizing, transportation, and logistics costs.
Developed to reduce unplanned and uncoordinated events that distort the smooth flow of product throughout the supply chain (reduces bullwhip effect) -
Three Drivers of Effective Supply Chain Planning → 1.) Supply Chain Visibility
2.)Exception management to respond to disruptions and minimize/prevent potential problems
3.) Enables identification of trade-offs that can increase functional costs, but lower total system costs
-Stay focused on the customer!