Out-of-Stock indicators calculationOut-of-Stock indicators calculation

Methodology overview

Dec 2007

ContentsContents

Brief history of key business indicatorsBrief history of key business indicators

Existing OOS definitionsExisting OOS definitions

Tailoring OOS to our situationTailoring OOS to our situation

OOS indicators groupOOS indicators group

Report layout/distributionReport layout/distribution

History of business indicators

At the end of 19th century companies producing diverse products emerged – decision-making now required business information

Pre-requisites for business indicators calculation Data storage facility – historical data warehouse Computing power Source information within the computer-based

system Methodology

Terms: Organization levels

Sales Organization (SO)

PlantPlantPlant

SAP era

Franchise

PlantPlantDepot

pre-SAP era

=

=

Daily level calculation

5 days a week – only working days (Mon-Fri)

Terms: Time

Terms: Initial Data for calculation

Actual Stock Opening balance of each date 2 out of 6 stock categories

Unrestricted Transfer within a plant

Actual Sales Sales on date of settlement Sales for weekend are added to next Monday

Sales Forecast weekly forecast -2 weeks

Standard Pack (in ph.c.)

2x6 PET

2x8 PET

2x6 PET

OOS definition

Backorder - difference between cases ordered and reconciled invoice in case at the scheduled departure time for a delivery vehicle an SKU ordered is not loaded.

%100astSalesForec

BackorderOOS

%%

..

..

cph

cph

We need to try to figure out another logical way of calculation.

Service Level definition

%100#

#

SKUTotal

leSKUAvailabelServiceLev

%% each

each

Shows how many SKU’s out of forecasted list are available

OOS: Stock vs Forecast method

Level: daily, SKU, Plant

actSalesForec

StockastSalesForecOOS

,0max

5

astWeeklySalesForecastSalesForec

(1)

OOS: Stock vs Forecast method (graph)

OOS

Introducing Actual Sales

Sales might go on with low stock

Reasons: Just-In-Time production/delivery Incorrect stock showing in the source system

WHEREStock < SalesForecastAND ActualSales < SalesForecast

actSalesForec

sActualSaleastSalesForecOOS

(2)

Introducing Actual Sales (Graph 1)

OOS

Oversales

Introducing Actual Sales (Graph 2)

OOS

No OOS

Introducing Actual Sales: results comparison

Daily calculation W1-749 on SKU/plant level aggregated(1

) SF

vs

Sto

ck(2

) SF

vs

Sto

ck/S

ale

s

9.86%

9.06%

Sales Restriction

Sales are restricted when Stock Level reduces to 2-5 days

WHEREStock < SalesForecast * KAND ActualSales < SalesForecast

actSalesForec

sActualSaleastSalesForecOOS

(3)

K – Stock Threshold

too low – not helps much

too high – we consider

low sales as OOS

K = 2 – at this level sales are very likely

restricted

Sales restricted due to low stock (Graph 1)

175736 Coca-Cola 2x6 PET Regular at plant 0136

Undersales?

No OOS

Sales restricted due to low stock (Graph 2)

175736 Coca-Cola 2x6 PET Regular at plant 0136

OOS

Sales Restriction: results comparison

Daily calculation W1-749 on SKU/plant level aggregated

9.86%(1) SF vs Stock

9.06%(2) SF vs

Stock/Sales

11.09%(3) SF vs

K-Stock/Sales

Introducing Weekly Sales level check

Sales on each day of the week are not equal

Even if some days if week gone undersale weekly sales forecast might be fulfilled

Introducing Weekly Sales level check (Graph 1)

67266 0.5x12 APET Tea Berry at plant 0136

OOS

OversalesOversales

OOS and Lost Opportunity

OOS

evident loss of sales

Lost Opportunity

based on proposition that sales could go on on condition FG is available

FG Stock is build basing of Weekly Sales Forecast

Calculation OOS (2) is Lost Opportunity

Weekly Sales check OOS definition

WHEREStock < SalesForecast * KAND ActualSales < SalesForecast

actSalesForec

sActualSaleastSalesForecOOSdaily

(4)

astSalesForec

sActualSaleastSalesForecOOSweekly

)0;max(

),min( OOSweeklyOOSdailyOOS

Introducing Weekly Sales level check (Graph 2)

No OOS

OOS Weekly = 21430 phc

OOS Daily = 0 phc

Weekly Sales Level check: results comparison

Daily calculation W1-749 on SKU/plant level aggregated

9.86%(1) SF vs Stock

9.06%(2) SF vs

Stock/Sales

11.09%(3) SF vs

K-Stock/Sales

9.26%(4) Weekly level

SKU

SO

Product/Pack

Plant

I

IV

III

II

Out-of-Stock YTD

5.58% 2.85%

4.99%9.26%

SKU -> Product/Pack (promo/regular)

promo regular

SKU -> Product/Pack (sales without forecast)

Sales without forecast YTD5 689 029 ph.c.

4% of Sales Forecast

2 506 601 ph.c. – Coca-Cola762 523 ph.c. – Sprite

Plant -> Sales Organization

Actual sales not for all plants are available (4 plants have sales forecast and no actual sales)

10 Sales Locations which have no dedicated Plant in SAP

If Sales Forecast on SO level is fulfilled then it is not Out-Of-Stock situation. It’s Lost Opportunity

Service Level

%100#

#

SKUTotal

leSKUAvailabelServiceLev

Shows how many SKU’s out of forecasted list are available

SKU Available # - count of SKU with 5 of more days of sale on stock

SKU Total # - count of SKU forecasted

Calculation on daily level, SKU, Plant.

OOS Indicators Group

OOS indicatorsOOS indicators

OOS

Service Level

availability of FG

(SKU – Plant / daily level),

% of positions with at least 5 days stock

Lost Opportunity

whatever could be sold additionally in case sufficient FG stock is available

(SKU – Plant / daily level),

% of Sales Forecast

sales lost due to not enough stock

(Product/Pack – SO / weekly level),

% of Sales Forecast

OOS Indicators Group

OOS indicatorsOOS indicators YTDYTD

OOS

Service Level SLA

Lost Opportunity

Although it is not SLA, still it’s important and useful indicator to be

measured on

SLA2.85%

72%

9.06%

List of Exclusions for OOS/Service Level

OOS and Service level measure Planning Department performance

Some global reasons might prevent Sales Forecast supply Temporary delisted products (f.i. Fruktimes during the

peak season); Permanently delisted products (f.i. Fanta Wildberry); Shifted timing in Sales Forecast; Serious engineering problems (f.i. when glass line fails

to start).

Not controlled/influenced by Planning

OOS Report distribution

Report is issued on weekly basis On Monday calculation is performed and report is

submitted to Production Planners’ approval On Tuesday the report is published

Report is based on pivot tables allowing user to drill-down as deep as required – makes possible OOS analysis.

OOS for previous years is to be aligned with current calculation method in order to enable historical benchmarking.

OOS Report layout (table)

Pivot table withfree characteristics

OOS Report layout (graphical representation)

OOS indicators group vs Traditional Method

+ More realistic showing

Many variances are considered

“Sandbox” graphical representation Conveys information

better Enables drill-down

analysis

- calculation is complex,

not transparent and resource-demanding

OOS Visualization Toolshows stock/sales situation on

SKU-Plant level

Visualizer Tool