demand planning & inventory control¿_workshop... · 2019-06-10 · 3% 7% 10% 13% 16% 31% 37%...
TRANSCRIPT
Copyright © 2017, Mantis Group
Demand Planning & Inventory Control
End to end Supply Chain
Technology Day
Technology Day \
D
C
B
A
Business
Environment
Economical
Impact & ROI
SCP
Fundamentals
Trends & New
Technology
Agenda
Technology Day \
D
C
B
A
Business
Environment
Economical
Impact & ROI
SCP
Fundamentals
Trends & New
Technology
Agenda
Technology Day /
Cash from the customer
Cash
Sales of finished goods
/services
Debtors
Transformation process
Inventory
Purchase of resources
Creditors
Row Materials
Semi Finished
WIP & MRO
Finished
Goods
Business Cycle
Technology Day \
REVENUE01 CASH FLOWS02 PRODUCTIVITY03 PROFIT04
Increasing Revenue Growth
Posting greater cash
flows
Improving productivity Increase Profit
Increase Sales
Improve Customer Service
✓More accurate forecast
✓Eliminate lost sales
✓ Immediate response to
demand/market changes
✓ Inventory Reduction
✓ Precise order projection
✓ Supplier’s constrains
✓ Order Cycle
Optimization
✓ Internal and external
Collaboration
✓ Align Demand & Supply
Plans - Automatically
✓ Action ready
recommendation
✓ Management by
exception
✓ Minimum manual
intervention
✓ Automate Tactical
Tasks, Focus on Profit
& Sales Driving Tasks
✓ Reduce inventory
✓ Reduce inventory costs
✓ Increase Sales
✓ Increase inventory turns
Top priorities for executives
Technology Day \
According to SmartBrief research report.
Business Environment
2021
2020
2019
2018
2017
2016
100%75%50%0% 25%
34%
37%
41%
45%
47%
50%
Amazon’s e-commerce is keeping growing
The problem is that the 50% of the responders do not see Amazon or Ali Express as a competitor
Technology Day \
AMAZON’S DOMINANCE OF U.S. E-COMMERCE
WILL GROW
The retailer’s online growth will keep outpacing
that of traditional retailers
Estimates from Needham & Co.
50%
Business Environment
3%
7% 10%
13%
16%
31%
37%
Han
dlin
g E
ven
t/P
rom
oti
on
al
act
ivit
ies
Lack
of
inte
rnal p
roce
ss a
nd
too
ls
Incr
easi
ng
Su
pp
lier
Co
llab
ora
tio
n n
eed
s
Lon
g L
ead
Tim
es
Man
ag
ing
New
pro
du
ct
intr
od
uct
ion
Incr
easi
ng
Vo
lati
lity
of
Dem
an
d (
new
co
mp
eti
tors
,
new
cu
sto
mers
, d
igit
al e-
com
merc
e)
Co
mp
lex
Patt
ern
s o
f C
ust
om
er
Dem
an
d
ChallengesWhich of the following describes the challenges your organization
currently faces or will face in the short-term (next three years) in your
inventory planning and forecasting environment?
.
Technology Day \
According to SmartBrief research report.
3-4 / 10
*Percentage of respondents who ranked this as the No. 1 concern out of
seven. Percentages total over 100% due to multiple responses
facing a challenge with the demand
pattern and volatility
Business Environment
5% 5%
20%
26%
36%
72%
85%
Art
ific
ial I
nte
llige
nce
& D
eep
Lear
nin
g
Mac
hin
e Le
arn
ing
Reg
ress
ion
Mo
del
s
Ad
apti
ve T
ime
Seri
esFo
reca
stin
g
Tim
e Se
ries
Fo
reca
stin
g
Mo
vin
g A
vera
ges
His
tori
cal S
ales
Dat
a
Forecasting TechniquesWhat forecasting techniques do you currently use for forecasting
demand?
Technology Day \
According to SmartBrief research report.
*Percentage of respondents who ranked this as the No. 1 concern out of
seven. Percentages total over 100% due to multiple responses.
Uses basic forecasting technics85%
Business Environment
13%
24%
36%
48%
56%
71%
75%
Social Media Influences
Events -Concerts/Sports/Conventions,
etc
Weather Influences
Assortment Changes
Product Relationship (Productaffinity/Cannibalization)
Programs or Promotions
Price Change ImpactDemand FactorsWhich of the following demand factors are incorporated
in your forecast models?
Technology Day \
According to SmartBrief research report.
incorporate external influence like social media
13%
only
Business Environment
e-commerceIoT increase and
impactDemanding customers
Increase in digital technology
Technology Day \ Business Environment
Technology Day \
D
C
B
A
Business
Environment
Economical
Impact & ROI
SCP
Fundamentals
Trends & New
Technology
Agenda
Regional Warehouse
RetailManufacturing Supplier
Technology Day \
CentralWarehouse
Effects
• Optimized inventory in the supply chain
• Improved end customer availability
• Centralized control of inventory management
• Reduction of manual efforts
• Reduction of excess and obsolete stock
• Reduce rush ordering
Method
• Full transparency
• Automatic refill
• Collaboration
• Life cycle management
• Redistribution
• Manage by exception
Consumer
Turning the flow
Supply Chain Drives Profit
How are you going to impact your company’s profit?
Technology Day \
Sales Drive Revenue,
Profit Drivers
Technology Day \
Demand
How much will sell
Supply
How much to supply
Increase
Profit
Decrease
Inventory
•Demand Forecasting
•Demand Planning
•Collaborative Demand Planning
Forecasting
•Replenishment Optimization
•Replenishment Planning
•Multi Echelon Inventory Optimization
•Constrained Purchasing
Replenishment
STRATEGY
SCENARIOS
PROMOTIONS
OFFERS
ANALYTICS
Approve
Order
START
Transaction
Analysis
Demand
Forecasting
Inventory
Order
Optimization
Recommend
ations &
Exceptions
Supply Chain Planning
Cu
sto
mer
Serv
ice
Low
est In
ven
tory
Investm
en
t
No surplus. No stockouts. No surprise.
Last
yearYesterday Today Tomorrow
SuppliersCompetitors
Customers
Reduced Inventory
Correct service level
Increased cashflow
Low investment risk
Last
month
Wheather
Technology Day \ Forecasting approach
Forecast
Segmentation
Causal
Deterministic
Consensus
Stochastic
Technology Day \ Forecast Segmentation
Technology Day \
Stochastic Stochastic
Moving Average
Moving Average percentage change
Exponential Smoothing (Simple-
double-triple)Adoptive
exponential Smoothing
Least Square trend line
Auto Regressive Moving Average
Average Level Change / Average
Percentage Change
Compare the forecast error by SKU by model by MAPE
Select the model for each SKU that produces the least forecast error
𝑌𝑡 = 𝜃0 +
𝑖=1
𝑝
𝜃𝑖 ∗ 𝑌𝑡−𝑖 + 𝛽𝑗 + 𝜖𝑡
Forecast
Segmentation
Causal
Deterministic
Consensus
Stochastic
Technology Day \ Causal
Causal
Multiple Linear
Regression (MLR)
Simple Regression
Analysis
Estimate the relationship among variables (independent variables with the depended variables)
ex. Demand with promotions/events/price/advertise etc
log( 𝑆𝑙𝑡)= 𝛼1𝑅𝑙𝑡 + 𝛼2(𝑅𝑙𝑡 − 𝑃𝑙𝑡)/𝑅𝑙𝑡 + 𝛼3𝐼𝑙𝑡
𝑀 + 𝛼4𝐼𝑙𝑡𝐷 + 𝛼5𝐼𝑙𝑡
𝑀𝐷
+
𝑖=1
𝑘
( 𝛼1𝑖𝑅𝑖𝑙𝑡 + 𝛼2𝑖(𝑅𝑖𝑙𝑡 − 𝑃𝑖𝑙𝑡)/𝑅𝑖𝑙𝑡 + 𝛼3𝑖𝐼𝑖𝑙𝑡𝑀 + 𝛼4𝑖𝐼𝑖𝑙𝑡
𝐷
+ 𝛼5𝑖𝐼𝑖𝑙𝑡𝑀𝐷)
+
𝑗=1
𝑛
𝛽𝑗𝐻𝑗𝑙𝑡 +
𝑗=1
12
𝛾𝑗𝑀𝑗𝑙𝑡 +
𝑝=1
𝑃
𝜆𝑝𝑆𝑝𝑙𝑡
Forecast
Segmentation
Causal
Deterministic
Consensus
Stochastic
Technology Day \ Deterministic \Multi echelon
D.C Forecast
Store #1
Store #2
Stochastic Forecast On-Order
On-Hand Order
Forecast
Segmentation
Causal
Deterministic
Consensus
Stochastic
Technology Day \ Consensus Forecast
Consensus
Delphi method
S&OP
Integrated Business Process
Transparency
Communicate
Collaborate Forecast
Segmentation
Causal
Deterministic
Consensus
Stochastic
Technology Day \
Promote efficiency in
Production and purchasing
by minimizing the cost of
providing an adequate level
of customer service.
Production &
Procurement
Improve Capital Cost
efficiency
Capital Cost
Improve Profit.
Profit
Maximise Customer Service.
Customer Service
Reduce Obsolete Stock.
Obsolete Stock
Inventory Control Objectives
Technology Day \
inventory for immediate use
typically produced in batches
(production cycle) .
Cycle Stock
inventory carried in anticipation of events
smooth out the flow of products in supply chain
also called seasonal or hedge inventory
Anticipation Inventory
extra inventory carried for uncertainties in
supply and demand
also called buffer stock .
Safety Stock
– inventory in transit
– exists because points of supply and
demand are not the same
– also called transportation inventory.
Pipeline Inventory
inventories not directly related to
product creation
Maintenance, Repair &
Operating Items MRO
refers to inventory that is at the
end of its product life cycle
also called dead stock.
Obsolete Stock
Inventory Types
Technology Day \
Procurement costs
Carrying costs
Out-of-stock costs
• Order processing
• Shipping
• Handling
• Purchasing cost: c(x)= $100 + $5x
• Mfg. cost: c(x)=$1,000 + $10x
• Capital (opportunity) costs
• Inventory risk costs
• Space costs
• Inventory service costs
• Lost sales cost
• Back-order cost
Inventory Costs
Technology Day \
When to order?
How much to order?
What is the minimum stock required?
How much does it cost?
Inventory Policy
Technology Day \
Inventory Control Systems
Kanban
Just In Time
Fixed Order Cycle
Fixed Order
Quantity
Min-Max
Time
.
.
.
.
.
.
.
.
.
.
.
.
.
............... .......... ....
**ReorderQuantity (Q)
Lead Time(L)
Maximum Rate of UsageWithout Stock-out
Q Q
Stock Level
*Reorder LevelPoint (A)
Expected Rateof Usage (R)
Buffer StockLevel
*ROL= Forecast over lead -time + buffer stock
**ROQ can be determined by EOQ or Coverage Analysis
.
.
.
.
.
.
.
.
*ORDER UP TO LEVEL**Reorder Quantity
Q1
Stock Level
Buffer StockLevel
Time
Q2
Q2
Q3
Q3
Lead Time (L)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Lead Time (L)
Review Period (T)
ReviewPeriod (T)
Cover period
**Reorder Quantity
*OL=Forecast of Demand in cover period + Buffer Stock
**ROQ=Order Level-Effective Stock + Back Orders
Inventory Control Systems
Technology Day /
Buffer
Stock
Service
LevelLead Time
Forecast
Accuracy
Replenish
ment
frequency
A
20%
80% 15%
5%
B Items
30%
C Items
50%
80% 85% 90% 95% 99%
INV
ENTO
RY
€
Service Level Analysis
Minimum Stock Target Capital
Maximum Stock Current stock Capital
ABC Classification
How do I get there?
Traditional Planning
I want to go here.Intelligent, actionable recommendations
Comprehensive Planning
Technology Day / The choice
Control
Error correction
Prevent
Control
Error correction
Prevent
Tactical and
strategic potential
Today Future
Strategy
Advanced automation means users become key Inventory Investors
and drive profit to the companies bottom line. Frees up time so users
can do more advanced tasks such as forward buying, promotion
management, capacity constraint management, internal collaboration
and external with trading partner
Inventory Reduction
Overstock reduction
15-30%
Revenue Increase
12-20%
Cash flow
improvement
15-30%
Profit Gain
30-40%Increase service
levels
3-10%
Technology Day \ Benefits
Technology Day \
D
C
B
A
Business
Environment
Economical
Impact & ROI
SCP
Fundamentals
Trends & New
Technology
Agenda
Technology Day \ ROI study
Technology Day \
Actual Conditions
DC Count 2
DC SKU Count 10.500
Current Branch Fill-rate % 95,00%
Current Inventory Turns 3,7
Supplier Count 50
Branch Count 41
Branch SKU Count 4.200
Current Turns 2,7
Annual Sales 75.000.000 €
Inventory Value (Average) 17.000.000 €
COGS 55.750.000 €
Annual Sales Growth Rate: 3,00%
Gross Margin on Sales: 25,7%
Carrying Cost Rate: 10,00%
Replenishment Buyer Count 5 Wkly hrs Replenishing (each person) 15,00
Hourly € - Buyer Time: 10,00 €
Inventory Reduction 10,7 %
Service Level Increase 2,13 %
NPV Discount factor 4%
ROI study assumptions
investment
560Kin 5 years
Technology Day \Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Inventory (€)
Without System 17.000.000 € 17.000.000 € 17.510.000 € 18.035.300 € 18.576.359 € 19.133.650 €
Inventory Reduction: 0% 11% 11% 11% 11% 11%
Implementation Effectivity Factors 0,00 0,50 0,80 1,00 1,00 1,00
Software Adoption Improvements Factors 0,00 0,00 0,05 0,08 0,09 0,10
With System Reductions - € 16.094.750 € 15.943.555 € 15.970.484 € 16.419.922 € 16.892.143 €
Forward Buy Incremental COGS %
With System Reductions and Forward Buying - € 16.094.750 € 15.943.555 € 15.970.484 € 16.419.922 € 16.892.143 €
Inventory reduction 905.250 € 1.566.445 € 2.064.816 € 2.156.437 € 2.241.507 €
Incremental annual inventory reduction 905.250 € 661.195 € 498.372 € 91.620 € 85.070 €
Sales (€)
Growth at Annual Rate 75.000.000 € 77.250.000 € 79.567.500 € 81.954.525 € 84.413.161 € 86.945.556 €
Annual Sales Growth Rate: 3% 3% 3% 3% 3% 3%
Service Level Improvement 0,00% 2,13% 2,13% 2,13% 2,13% 2,13%
With Better Service 75.000.000 € 78.070.781 € 80.920.148 € 83.696.059 € 86.206.940 € 88.793.149 €
BR Sales Increase - € 820.781 € 1.352.648 € 1.741.534 € 1.793.780 € 1.847.593 €
Turns Without System - 3,38 3,38 3,38 3,38 3,38
COGS 74% 74% 74% 74% 74%
Turns With System Reductions 3,6 3,8 3,9 3,9 3,9
Days Supply 101,2 96,7 93,7 93,5 93,4
Profit from... (€)
Profit from Inventory Reduction 0 € 90.525 € 156.644 € 206.482 € 215.644 € 224.151 €
Carrying Cost Rate: 10% 10% 10% 10% 10% 10%
Profit fom Increased Sales 0 € 210.667 € 347.180 € 446.994 € 460.403 € 474.216 €
Gross Margin on Sales: 26% 26% 26% 26% 26% 26%
Profit from Productivity Gains - € 5.850 € 9.360 € 11.700 € 11.700 € 11.700 €
Weekly Buying Hours Reduced by: 22,5 22,5 22,5 22,5 22,5 22,5
Hourly €€ - Buyer Time: 10,00 € 10,00 € 10,00 € 10,00 € 10,00 € 10,00 €
ROI Calculations
Technology Day \
Income Statement Impact - TemplateYear 1 Year 2 Year 3 Year 4 Year 5 Total NPV
Additional Sales 820.781 € 1.352.648 € 1.741.534 € 1.793.780 € 1.847.593 € 7.556.335 € 6.639.946 €
Increased Margin Euros from Additional Sales 210.667 € 347.180 € 446.994 € 460.403 € 474.216 € 1.939.459 € 1.704.253 €
Savings 100.875 € 170.504 € 222.682 € 231.844 € 240.351 € 966.255 € 848.331 €
Reduced Inventory Carrying Cost 90.525 € 156.644 € 206.482 € 215.644 € 224.151 € 893.445 €
Reduced Labor Cost 5.850 € 9.360 € 11.700 € 11.700 € 11.700 € 50.310 €
SaaS Offset Technology Cost (Server + 2 x 1/20 FTE) 4.500 € 4.500 € 4.500 € 4.500 € 4.500 € 22.500 €
SaaS Annual Fee -176.000 € -96.000 € -96.000 € -96.000 € -96.000 € -560.000 € -504.298,02 €
SaaS Annual Operating Income Increase (pre tax) 135.542 € 421.684 € 573.675 € 596.247 € 618.566 € 2.345.715 € 2.048.286 €
Balance Sheet Impact
Year 1 Year 2 Year 3 Year 4 Year 5 Total NPV
Cash 905.250 € 661.195 € 498.372 € 91.620 € 85.070 € 2.241.507 € 2.073.034 €
From Inventory Reduction 905.250 € 661.195 € 498.372 € 91.620 € 85.070 € 2.241.507 €
Inventory Reduction 905.250 € 661.195 € 498.372 € 91.620 € 85.070 € 2.241.507 € 2.073.034 €
Increase in Shareholder Equity 135.542 € 421.684 € 573.675 € 596.247 € 618.566 € 2.345.715 € 2.048.286 €
Days Supply 101 97 94 94 93
Average Inventory 16.094.750 € 15.943.555 € 15.970.484 € 16.419.922 € 16.892.143 €
Impact
00
00
00
01
01
01
01
01
02
02
02
Year 1 Year 2 Year 3 Year 4 Year 5
Εκα
το
μμ
ύρ
ια
Sales Impact
14,0 €
15,0 €
16,0 €
17,0 €
18,0 €
19,0 €
20,0 €
Year 1 Year 2 Year 3 Year 4 Year 5
Εκα
το
μμ
ύρ
ια
Inventory reduction
Without System With System Reductions
- €
50,0 €
100,0 €
150,0 €
200,0 €
250,0 €
300,0 €
350,0 €
400,0 €
450,0 €
500,0 €
Year 1 Year 2 Year 3 Year 4 Year 5
Χιλ
ιάδ
ες
Margin Impact
- €
100,0 €
200,0 €
300,0 €
400,0 €
500,0 €
600,0 €
700,0 €
Year 1 Year 2 Year 3 Year 4 Year 5
Χιλ
ιάδ
ες
Operating Income Increase (pre tax)
Technology Day \
Five Year NPV
Inventory Reduction €2.073.034
Income Stmt Impact €2.552.584
SaaS Annual Fees (504.298,02 €)
Months to ROI 11,85
Five Year Operational Impact Current Level Change New Level
Service Level Increase 95,00% 2,13% 97,13%
Inventory Reduction 19.133.650 € 11,7% 16.892.143 €
Inventory Turns Increase 3,3 19% 3,9
Weekly Productivity Gains (hours)
75 22,5 52,5
Benefits
months
11,85 to ROI
Technology Day \
D
C
B
A
Business
Environment
Economical
Impact & ROI
SCP
Fundamentals
Trends & New
Technology
Agenda
Technology Day / New Trends
Machine Learning definition
“Field of Study that gives computers the ability to learn without being explicitly programmed”
Arthur Samuel (1959)
Technology Day \
Recommendation System Face recognition Character recognition Drug discovery
Cancer diagnosis Drive assistance Games Voice Assistant
Machine Learning is everywhere
Technology Day \ Trends
Computer
Data Programs
Output
White Box Modeling
• Simpler computation
• Emphasis on introspection, form
• Correct model
ALGORITHMIC SOLUTION
Humans formulate the relationships between variables
TRADITIONAL STATISTICS
Computer
Data Output
Program
Black Box Modeling
• High computational complexity
• Emphasis on speed and quality of
prediction
• Performant model
• Curve fitting by linear regression
MACHINE LEARNIG SOLUTIONS
Algorithms formulate the relationships between variables
MACHINE LEARNING
Technology Day \ Traditional Statistics vs Machine Learning
https://www.youtube.com/watch?v=xoSsRMe6Uig
Accenture Gartner
Forrester McKinsey
• 70% of executives said they are
significantly increasing
investments in AI compared with
2 years ago
• One of the most obvious places
to start is the supply chain
• Supply chain organizations
expected the level of machine
automation in their supply
chain processes to double in
the next five years
• Amazon saw 55% of sales
come from personal
recommendations made by
machine learning algorithms
• U.S retailer supply chain
operations who have adopted
data and analytics have seen
up to a 19% increase in
operating margin over the last
five years
Technology Day /
Technology Day \
• Regression (Linear, Logistics)
• Classifier (Hierarchical, Naïve Bayes)
• Feature Engineering
• Ensemble (Random Forest, Boosting)
• Rule based (Association)
• Clustering Neural Networks
• Graph theory
ALGORITHMS
• Cloud Storage
• Cloud computing GPU Processing
• Big Data tools (Hadoop, Spark,
Kafka)
COMPUTER
POWER
• Big Data (Volume, variety, variability)
• Data Anomalies
• Availability
RICH DATA
Why now?
Technology Day \
Promotion Clustering: Promotion Event
Clustering with the help of a clustering
engine
Option 02
Trade Promotion Forecasting Modeling of
promotional events with the help of
Learning Machine techniques
Option 03
Automate workflows and decisions.
Option 06
Derive and Understand demand drivers
.
Option 05
Product clustering
Product association –
Product cannibalizationOption 04
Seasonality Clustering Analysis and
classification of products in seasonality groups,
using Learning Machine techniques Option 01
Usage
Technology Day \ Testimonials
Today’s science fiction is tomorrow’s science fact.
The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom.
Isaac Asimov
