Supply Chain Management Solution Finder

To review the fundamental concepts of Supply Chain Management please click What is Supply Chain Management.

Are you experiencing one or more of these problems while trying to manage your supply chain?

• High Inventories?
• Frequent Stock-outs?
• Poor or Unsatisfactory Customer Service?
• Inaccurate sales/demand forecasts?
• Regular expediting?
• Low/unsatisfactory productivity?
• Frequent changes to production schedules?
• High costs throughout your Supply Chain?
• Regular fire-fighting?

You have come to the right place. While we do not promise that we have solutions for every problem you may have in your organisation nor do we promise that our solutions will completely eliminate the problems they can address, our solutions will certainly help you in reducing/minimising some of the problems listed above.

As a matter of fact, most of our existing clients who came to us after visiting our website tell us that they visited our website because they were trying to find solutions for some of their business problems. So now let us look at each of these problems and discuss how our solutions can address them.

HIGH INVENTORIES

A significant cost to manufacturing, distribution and retail organizations is the inventory carried to support internal processes and sales to external customers. As a matter of fact, inventory is a financial expense that ties up cash and can represent 40-50% of your company capital investments.

Right-sizing your inventory without compromising service levels provides a beneficial way to increase your‚ “return on inventory investment. But accomplishing this can be challenging if you do not have complete visibility to your products on hand ¦ or the right planning and optimization tools in place for segmenting your inventories and building optimal plans that take demand variance, supply reliability and product obsolescence into consideration.

If you have high inventories, the most effective approach is to identify the causes rather than focus on symptoms. Among the typical causes of excess inventory are:

• The customers demand finished goods on hand, so you need to forecast future customer demands but the forecast accuracy is poor.
• Your planning system is unreliable.
• Products are purchased or manufactured in larger quantities for the economy of scale.
• Customer orders are released for manufacturing earlier than needed
• Lead times are long.
• Suppliers are unreliable
• Extra inventory is purchased or manufactured as the allowance for scrap
• Inventory is manufactured just to absorb overheads
• Manufacturing is measured on the utilization of equipment
• Purchasing is measured on price reductions or production shortages
• Poor data integrity (for Inventory records, Bills of Materials and more)

Unfortunately, some of these causes (8, 9 and 10) above are purely management issues and no software solution can address them. Number 7 is a quality issue and there is no software solution for it. Also, there is no software solution for poor data integrity; it generally a people and process issue and needs to be addressed accordingly.

POOR FORECAST ACCURACY

Notice that this was also listed as a separate problem (number IV) in our list of problems.

If your product demands are very erratic, the life cycles for your products are very short and there are continuous technology changes, perhaps it will be difficult to significantly improve your sales/demand forecasts. I suggest that in the majority of the businesses this is not always the case. Majority of the businesses can as a starting point rely upon the past sales history to develop forecasts that may need to be adjusted for what is typically called market intelligence.

Unfortunately many companies even today do not formally forecast or forecast using manual methods. It amazes me that many companies will employ highly intelligent, highly paid executives to spend their time gathering sales data for them to massage it in an Excel Spreadsheet to develop a forecast – a process that at times takes a few days. More often than not, they spend 95% of this time gathering data and 5% of the time in evaluating results

We have a proven solution here and it is called Forecast Pro It is inexpensive, comprehensive, easy to use, highly reputed and a very powerful forecasting package. You do not need any knowledge of statistics to use it. It has a built-in expert system to automatically select the best statistical forecasting algorithm for each item to be forecasted. It accounts for events such as promotions or stock-outs while forecasting. If appropriate, it can forecast top-down from say a national level to a state level. It provides very powerful exception reporting including forecast accuracy evaluation. It allows for judgmental forecasts overrides and facilitates collaborative forecasting to allow for inputs from appropriate people in your organisation.

UNRELIABLE PLANNING SYSTEM

If you are already using a Planning System (perhaps a typical ERP system with planning modules including Material Requirements Planning (MRP) and if you think the planning system is not working or is unreliable, perhaps you need to look at the possible causes such as inaccurate data, lack of understanding and more.

We do not recommend that throwing out your current ERP system and starting from scratch is what you should do. If you do not address people and process issues first no system will work for you.

However, if you do not have a planning system (and perhaps use things like Excel Spreadsheets) and you are not prepared or cannot afford or justify implementing an ERP system, we have an excellent software solution called Supply Chain Planning (SCP). It is very affordable, user-friendly, easy to integrate with your existing systems and offers integrated Forecasting, Distribution Requirements Planning (DRP), Material Requirements Planning and Capacity Planning (optional module) capabilities. If you are a VMI (Vendor Managed Inventory) Vendor for your customers, SCP will be an excellent tool for you.

Supply Chain Planning can also provide help in managing a couple of causes of high inventories listed above, namely

Lead times are long
Suppliers are unreliable

Some companies use the concepts of Vendor or Supplier Scheduling **effectively to address these issues. You can prepare Vendor Schedules using the information available from SCP. While we are not promising that by itself will reduce your lead times and make the suppliers more reliable, the experience of other companies suggests that Vendor Scheduling helps.

APICS Definition- A purchasing approach that provides suppliers with schedules rather than with individual hard-copy purchase orders. Normally, a supplier scheduling system will include a business agreement (contract) for each supplier, a weekly (or more frequent) schedule for each supplier extending for some time into the future, and individuals called supplier schedules. Also required is a formal priority planning system that works well, because it is essential in this arrangement to provide the supplier with valid due dates.
Vendor Scheduling can perhaps partially help in cause number 3.

Products are purchased or manufactured in larger quantities for the economy of scale. Customer orders are released for manufacturing earlier than needed

The first one is the result of the fact that in some manufacturing environments the setup times or changeover times are long. However, perhaps there are smarter ways to minimise changeover times (e.g. by sequencing jobs in an efficient manner such as going from lighter color or mild flavor to a darker color or stronger flavor). Typical ERP systems will not help you do it and it may become a complex exercise if you want to use manual scheduling methods.

Releasing customer orders for manufacturing early in a make-to-order environment is a symptom of the fact that your scheduling performance is not very good and hence a buffer is created by early release. Typical ERP systems schedule on the basis of infinite scheduling and expect you to sort out any constraints you may have in meeting such schedules. Trying to juggle a schedule manually can become a very complex and time-consuming exercise and then priorities can change on a daily basis.

STOCKOUTS

According to a Howard Business Review study for retail businesses, .. 72% of stock-outs were due to faulty in-store ordering and replenishing practices retailers ordering too little or too late, generating inaccurate demand forecasts, or otherwise mismanaging inventory. Just 28% of stock-outs, we found, could be attributed to replenishment and planning problems in the supply chain. These included product droughts created by suppliers; category planners who mismanaged shelf space, promotions, or new product introductions; or supply chain managers who misjudged long-term demand.

If you examine some of the causes listed above, funny enough, the main reasons for stock-outs are the same as the main reasons for high inventories. They are:

• Forecast accuracy is poor.
• Your planning system is unreliable.
• Lead times are long.
• Suppliers are unreliable.

I am sure there are other reasons for stock-outs and there are bound to be some unexpected situations such as a very large one-off demand which may cause an out of stock; but if stock-outs are regular occurrences, there are some fundamental issues you need to address.

Our solutions that should help in improving the accuracy of demand forecasts include Forecast Pro. Our solution that will help in addressing other causes listed above is Supply Chain Planning.

POOR OR UNSATISFACTORY CUSTOMER SERVICE

What causes missed deliveries, poor on-time delivery performance, backorders, and lost sales?

Unavailability of products when customers want them.

Certainly, there are factors such as unexpected abnormal customer demands that can cause that. However, more often than not, the problems relate to inaccurate demand forecasts, late deliveries from suppliers, data integrity issues, unreliable suppliers, lack of or unreliable formal planning system, unreliable production schedules, poor on-time manufacturing schedule performance, and organisational issues such lack of teamwork, lack of communication and lack of accountability.

As you can see from the above list of potential causes, all of the causes have been mentioned in the discussion above meaning these causes can result in multiple problems.

CAUSE	POTENTIAL EFFECT	OUR SOLUTIONS THAT MAY HELP
Inaccurate demand forecasts	High Inventories, stock-outs, unsatisfactory customer service, regular expediting, high costs	Forecast Pro
Unstable and/or unreliable production schedules, poor on-time production schedule performance, poor visibility of production schedules	High Inventories, stock-outs, unsatisfactory customer service, regular expediting, low productivity, frequent changes to production schedules, frequent change-overs, high manufacturing costs
Lack of or unreliable material planning system	High Inventories, stock-outs, unsatisfactory customer service, regular expediting, low productivity	Supply Chain Planning (SCP) 4.0
Large Purchasing Lot size, Long Purchasing Lead Times, unreliable suppliers	High Inventories of materials	Supply Chain Planning for implementing Vendor Scheduling but management issues need to be addressed as well
Poor Data Integrity (Inventory Records, Bills of Materials and more)	High Inventories, stock-outs, unsatisfactory customer service, regular expediting, low productivity, quality issues, frequent change-overs, high manufacturing costs	Mainly a management issue; no software solution
Lack of or poor teamwork, lack of or poor internal communication and Lack of accountability	All the above and perhaps more	Mainly management issues; no software solution but formal systems such as our solutions may help improve teamwork and communications and establish accountability
Poor Quality	All the above and perhaps more	Mainly a management issue

OUR SOLUTIONS TO HELP MANAGE YOUR SUPPLY CHAIN

Supply Chain Business Solutions offers the following solutions to help manage your supply chain.

Forecast Pro is a proven sales forecasting, demand forecasting and a sales and operations planning tool that is used by over 35000 business professionals around the world mainly for forecasting future sales or customer demands of finished products.

Supply Chain Planning (SCP) is an integrated Forecasting, Distribution Requirements Planning (DRP). Master Production Scheduling (MPS) and Material Requirements Planning (MRP) tool, which is used by manufacturing and distribution businesses to plan inventories throughout their supply chain.