1 © the delos partnership 2003 customer relationship management setting up the forecast process -...
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1 © The Delos Partnership 2003
Customer Relationship Customer Relationship ManagementManagement
Setting up the forecast process
- ideas for improvement
2 © The Delos Partnership 2003
Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process
Filter Filter DemandDemand
ComputeComputeforecastforecast
CaptureCaptureActualActual
C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T
C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T
Hold Demand ReviewHold Demand Review
Agree commercialAgree commercial plansplans
AgreeAgreeExceptional demandExceptional demand
AssumptionAssumptions written s written down and down and
agreedagreed
AssumptionAssumptions written s written down and down and
agreedagreed
ReviewReviewAccuracyAccuracy
3 © The Delos Partnership 2003
Demand ControlDemand Control
CheckCheckForecastForecast
Check AbnormalCheck AbnormalDemandDemand
Receive Receive OrderOrder
100 % delivery to promise100 % delivery to promise100 % delivery to promise100 % delivery to promise
Give Customer a promiseGive Customer a promise
Check ATPCheck ATP
Agree Lead time forAgree Lead time forAbnormal demandAbnormal demand
ConsumeConsumeForecastForecast
It wasIt wasNotNot
In the In the forecastforecast
4 © The Delos Partnership 2003
Elements to decideElements to decide
• Horizon• Unit of Measure• ‘Time Buckets’• Time Fences• Level of Detail
– Item– Family– Capacity
5 © The Delos Partnership 2003
HorizonHorizon
• A forecast provides visibility for– Materials procurement– Internal capacity requirements– Short and long term financial projections– Suppliers’ capacity requirements
• Horizon of forecast needs to give adequate visibility
6 © The Delos Partnership 2003
Horizon Covers All NeedsHorizon Covers All Needs
24 months gives budget and forecast year
Budget process
6 monthsgives likely
outturn
30 months rolling forecast
Materials
Capacity
Cash
7 © The Delos Partnership 2003
Forecasting – Unit of Forecasting – Unit of MeasureMeasure
• Forecasting should be in unit of measure as sold to customer
• May need to be in aggregate where family volumes needed
• Issue – how to aggregate
8 © The Delos Partnership 2003
Forecasting - Time BucketForecasting - Time Bucket
• Need to determine whether basic time interval is – Month– Week– Day
• If monthly does it get divided into weeks• If weekly does it get divided into days?• If weekly or daily is each week or day going
to be different
9 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 10 20 30 40 10 20 30 40 8 16 24 32
Actual Demand
Proj Avail Balance
90 70 40 0 65 45 15 50 42 26 2 25
Available to Promise
CumulativeATP
Master Schedule
75 75 75
Item Level ForecastItem Level Forecast
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
10 © The Delos Partnership 2003
Demand Time FenceDemand Time Fence
Horizon
PLANMANAGEEXECUTE
Cumulative Lead TimeCumulative Lead Time
Add or subtractTo capacity
Strong Link to
Integrated EnterprisePlanning Process
Capacity andMaterials“firm”
Release Orders
Orders only
11 © The Delos Partnership 2003
Factors That Determine the Factors That Determine the DetailDetail
• Requirements for planning material and capacity
• Customer service policy• Position in the supply chain• Tradeoff between ‘precision’ and
‘accuracy’– Better to be roughly right than precisely
wrong
12 © The Delos Partnership 2003
Customer Relationship Customer Relationship StrategyStrategy
Design
Purchase
Intermediate Manufacture
Sub-assemble
Finish
Distribute
WhereDo you meetTheCustomer ?
StockTo Order
End itemForecast
CapacityForecast
FamilyForecast
13 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 25 25 25 25 25 25 25 25 20 20 20 20
Actual Demand
Proj Avail Balance
75 50 25 0 50 25 0 50 30 10 65 45
Available to Promise
CumulativeATP
Master Schedule
75 75 75
End Item Level Forecast End Item Level Forecast
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
14 © The Delos Partnership 2003
Forecast ConsumptionForecast Consumption
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 15 25 25 25 25 25 25 25 20 20 20 20
Actual Demand
10
Proj Avail Balance
75 50 25 0 50 25 0 50 30 10 65 45
Available to Promise
90 75 75 75
CumulativeATP
Master Schedule
75 75 75
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
15 © The Delos Partnership 2003
Customer ProfileCustomer Profile
Customer X 50 per month
Customer Y 10 per month
Customer Z 5 per month
Customers A… 35 per month
Total = 100 per month
Forecast at End Item Level
16 © The Delos Partnership 2003
Forecast ConsumptionForecast Consumption
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast
Actual Demand
Proj Avail Balance
75 50 25 0 50 25 0 50 30 10 65 45
Available to Promise
90 75 75 75
CumulativeATP
Master Schedule
75 75 75
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100
17 © The Delos Partnership 2003
Forecasting Different Forecasting Different Demand StreamsDemand Streams• Allows control of demand by market
segment or customer group or customer
• Prevents over-consumption by one market or sector
• Necessary when same product goes to different market sectors (e.G. Uk/export)
18 © The Delos Partnership 2003
In many companies multiple In many companies multiple demand streams for the same demand streams for the same
item need to be managed item need to be managed (consumed) separately and ATP (consumed) separately and ATP (available to promise) calculated (available to promise) calculated
separatelyseparately
Managing Multiple Demand Managing Multiple Demand StreamsStreams
19 © The Delos Partnership 2003
Managing Multiple Demand Managing Multiple Demand StreamsStreams
Examples of Multiple Demand Streams– Export and UK– Different Market Sectors
• Retail/Industrial• Spares/OEM
– Different Customer Groupings• Major Accounts• Minor Accounts
– Different Customers• Large Customer A• Large Customer B• All other Customers
– Different Customer Categories• Gold Card• Silver Card
20 © The Delos Partnership 2003
Global Supply Chain Global Supply Chain PlanningPlanningExtension of make to stock environment
Used when geography separatesmake from sell
Allows for visibility in chain to maximise inventory control
21 © The Delos Partnership 2003
Global Supply Chain Global Supply Chain PlanningPlanning
Bill of Distribution Same Product Code :Location code needed
22 © The Delos Partnership 2003
Distribution Planning Distribution Planning ProcessProcess
Receive ForecastReceive Forecast
Calculate PlanCalculate Plan
CaptureCaptureDataData
BALANCED PLANBALANCED PLANBALANCED PLANBALANCED PLAN
Hold Supply ReviewHold Supply Review
Transmit the planTransmit the plan
Receive Supply PlanReceive Supply Plan
Review Review actionaction
messagesmessages
Review Review actionaction
messagesmessages
ReviewReviewMessagesMessages
23 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 25 25 25 25 25 25 25 25 20 20 20 20
Warehouse Demand
Actual Demand
Proj Avail Balance
Available to Promise
Master Schedule
150 150 150 150 150 150
Master Schedule UKMaster Schedule UK
Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK
24 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 0 25 25 25 25 25 25 25 20 20 20 20
Warehouse Demand
100
150
50 150 100 50
Actual Demand
25
Proj Avail Balance
275 150 75 50 175 150 175 100 80 60 190 170
Available to Promise
125 0 150 0 0
Master Schedule
150 150 150 150 150
Master Schedule - UKMaster Schedule - UK
Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK
25 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 20 20 20 20 20 20 20 20 20 20 20
Actual Demand
15
Proj Avail Balance
60 40 20 100 80 60 40 20 100 80 60 40
Available to Promise
65 100 100
Master Schedule
100 100
Planned Release
100 100
DRP - GermanyDRP - Germany
Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80Location : 002 Germany
26 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 20 40 40 40 40 40 40 40 40 40 40 40
Actual Demand
20
Proj Avail Balance
50 160 120 80 190 150 110 70 180 140 110 70
Available to Promise
70 150 150 150
Master Schedule
150
*
150 150
Planned Release
150 150
DRP SpainDRP Spain
Part Number: 12345 Lead Time: 3 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 90Location : 003 Spain
* In
Transit
27 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 0 0 10 10 10 10 10 10 10 10 10 10
Actual Demand
20
Proj Avail Balance
50 50 40 30 20 60 50 40 30 20 60 50
Available to Promise
50 50 50
Master Schedule
50 50
Planned Release
50 50
DRP ItalyDRP Italy
Part Number: 12345 Lead Time: 3 periods Safety Stock: 20 Min Ord Qty: 50 On Hand: 70Location : 004 Italy
28 © The Delos Partnership 2003
Periods 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 5 20 20 20 20 20 20 20 20 20 20 20
Actual Demand
15
Proj Avail Balance
60 40 20 100 80 60 40 20 100 80 60 40
Available to Promise
65 100 100
Master Schedule
100 100
Planned Release
100 100
CPR – Customer ABCCPR – Customer ABC
Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80Location : 002 Customer ABC
29 © The Delos Partnership 2003
Hierarchy of ForecastHierarchy of ForecastThe
hig
her
the
leve
l
The
more
acc
ura
te
Marketing SubFamily
MarketingFamily
£ Plan £ Plan
Production
Family
Item Number
Production
Sub Family
Item N
umber
Customer/Distribution Centre
30 © The Delos Partnership 2003
Product VariantsProduct Variants
Blue PenPart Number 12346
Blue PenPart Number 12346
Red PenPart Number 12345
Red PenPart Number 12345
Black PenPart Number 12347
Black PenPart Number 12347
Green PenPart Number 12348
Green PenPart Number 12348
Variant Forecast Actual
Blue 40 50
Red 60 70
Black 30 20
Green 70 60
Total 200 200
How manyNibs
And
How manyCaps and barrelsNeeded ?
31 © The Delos Partnership 2003
Planning FamilyPlanning Family
Blue OptionPart Number 12346
Blue OptionPart Number 12346
Red OptionPart Number 12345
Red OptionPart Number 12345
Black OptionPart Number 12347
Black OptionPart Number 12347
Green OptionPart Number 12348
Green OptionPart Number 12348
Common Parts46783
Common Parts46783
Pen Family43785
Pen Family43785
20 % = 0.2
30 % = 0.3
15 % = 0.15
35 % = 0.35
Forecast = 200/mth
100 % = 1.0
32 © The Delos Partnership 2003
Modular Bill Works BestModular Bill Works Best
• If end item forecasting difficult or impossible because of number of items
• Manufacturing lead time exceeds competitive lead time
33 © The Delos Partnership 2003
Customer Relationship Customer Relationship StrategyStrategy
Design
Purchase
Intermediate Manufacture
Sub-assemble
Finish
Distribute
WhereDo you meetTheCustomer ?
StockTo Order
CapacityForecast
34 © The Delos Partnership 2003
Forecast of Capacity Forecast of Capacity
Work Centre Number : 41 Cum Lead Time : 6 periods Load Factor : 70%
Order 1456 : Item 1435 100 units 1.1 hours per unit = 110 hours
Order 1567 : Item 1325 200 units 1.2 hours per unit = 240 hours
Periods 1 2 3 4 5 6 7 8 9 10 11 12 13
Forecast 0 0 0 0 0 0 42 56 56 56 56 56 56
Actual Demand
56 56 56 56 56 56 14
Proj Avail Balance
0 0 0 0 0 0 0 0 0 0 0 0 0
Available to Promise
42 56 56 56 56 56 56
CumulativeATP
42 98 154 210 266 322 378
Master Schedule
56 56 56 56 56 56 56 56 56 56 56 56 56
35 © The Delos Partnership 2003
Establishing the Demand Establishing the Demand Management ProcessManagement ProcessThought needed to be given to
– Horizon– Level – planning bills, capacity or end item forecasting– Time buckets
Implementation of forecasting and DRP may require education of customer and agreement on key policies
Benefits are:– Reduced inventory– Improved customer service– Reduced effort in forecasting
36 © The Delos Partnership 2003
Cultural Issues to faceCultural Issues to face
• Why should I bother to take it seriously ?• This is an operational issue; its nothing to do
with Sales or Marketing• Forecasting takes away time from selling• I will spend a little time now, but much later• Forecasts are best done by a system
37 © The Delos Partnership 2003
Project OrganisationProject Organisation
STEERING COMMITTEE
PROJECT TEAM
INNOVATION
DEMAND
SUPPLY
PROJECTMANAGEMENT
SALESFORECASTING
CUSTOMERRELATIONSHIPMANAGEMENT
MASTERPRODUCTIONSCHEDULING
PROCUREMENTLEAN
AND AGILE
PERFORMANCEMEASURES
FINANCE
SSUUPPPPOORRTT
SSUUPPPPOORRTT
INTEGRATEDENTERPRISEPLANNING
SponsorSponsor
Project LeaderProject Leader
DATAACCURACY
LEANAND AGILE
SUPPLIERRELATIONSHIPMANAGEMENT
38 © The Delos Partnership 2003
Task Team RoleTask Team Role
VISION
VISION
STRATEGY
STRATEGY
TASKTEAMS
WORKINGSOFTWARE
DETAILEDPOLICIES
ANDPROCEDURES
DETAILEDROLES
CULTURE
DETAILED
KPIS
FORECASTING
CUSTOMERSERVICE
39 © The Delos Partnership 2003
Task TeamsTask Teams
• Translate their element of the strategy and vision into reality
• Cross-functional• Develop the policies and procedures that are
needed• Get familiar with the software, and make sure
that this integrates with policy and procedures• Develop the training material
40 © The Delos Partnership 2003
Forecasting benefitsForecasting benefits
• What I forecast I know I can sell• Forecasting is the only way of telling the
supply side what to make or buy• Forecasting better means more cash
and more profit• Forecasting better means less waste• Having a forecast can mean telling the
customer what they need !
41 © The Delos Partnership 2003
Forecasting more Forecasting more accuratelyaccuratelyMeans• Less Inventory• Better Customer Service• Reduced CostWhich means• More Cash• More Profit• A competitive edge
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