May
6
2010
Executive Dashboards are helping companies of all shapes and sizes to translate technical operations data for management and other key decision makers. In the world of demand management, dashboards are being used to bring to light various key indicators such as products that are performing well or poorly, unusual peaks in the demand data, how well the budgeted production schedule matches actual required production levels, and other information that plays a part in the company’s decision making process. The result has been an increased awareness of the demand planning function and increased support for their optimization needs. Companies who take advantage of dashboards are dramatically cutting down the time it takes to communicate key indicator progress. What may take weeks in some companies is now taking hours.
Software providers are taking note of dashboard optimization as well, integrating customized dashboards in their own modules to provide users with the ability to communicate demand data in a simple, effective manner. Anyone who’s been involved in communications between analysts and management is well aware of the barriers that exists. Dashboards are providing the much needed solution to a timeless problem of keeping things simple.
Look for the innovative new dashboards that will take demand planning to a new level of simplicity; coming soon from Avercast Forecasting Solutions.
Apr
29
2010
Top Down Forecasting is looked down upon in many forecasting groups because of the assumption that Top Down doesn’t take into account the different demand patterns for individual products. The reality is the numbers you get from using a Top Down technique are generally more accurate on the aggregate level, and this is where most executives want to see accuracy. Obviously being accurate at the disaggregate is important for specific SKU’s, and there are times when the executives want to see numbers that are going to help them make the decisions which sometimes have a large effect on the entire company. Here is a list of when Top Down Forecasting can have an advantage over other methods:
National- When a company is forecasting on a National level for total sales or total revenue, Top Down Forecasting is generally the right choice because the margin of error is lower. When you do bottom up forecasting for a general number like this all of the standard deviations start to add up and become a bloated standard deviation for national totals. This creates excessive error and makes the forecast less accurate which is probably a bad thing if you are having to present it to others.
Regional – On a regional level a Top Down approach can be very effective for everything except specific SKU’s. When a region can forecast revenue it becomes easy to see where to allocate resources which allow them to create more utility. Forecasting is most effective when it is used in planning, and top down forecasting at the regional level allows very effective planning. Knowing which regions are successful and which ones aren’t can be strategic in finding which areas are successful and why. If the successful region is doing something different they should share this information with the rest of the company.
Product Category- Supply planning basically relies on this forecast and if there is not a Top Down Forecast for product category then there is something that is missing in the planning process. Forecasting for product category allows greater efficiency, and less unfulfilled orders due to the ability to foresee what is coming and the ability to react to problems quickly. Top Down Forecasting product category is like being able to see the future and prepare for suppliers that are going to have some type of deficiency.
Top Down can be very efficient for different occasions but also has its downfalls. I will write another blog on when to use Bottom Up and the advantages that it has over the Top Down method.
Apr
12
2010
There are many different mistakes that can be made when dealing with inventory management, and most of these can be remedied by any Joe Schmoe that takes a second and thinks about what is happening. Hopefully the solutions will seem feasible and aren’t an impossible task for those who are reading this. There are three common illnesses that happen with inventory management that I would like to discuss, as well as, find a cure for the mistakes that commonly occur in many companies.
The first problem that commonly plagues companies is the fact that they desire the most accurate forecast possible and many times this helps (and believe me we believe), but it can also be a trouble for the company because they can spend a lot of time focusing on the forecast accuracy while losing sight of other important numbers. The important part of inventory management is making sure that there are measurements for all important functions such as customer fill rate and inventory turns. Sure forecast accuracy is important but having high expectations for all the numbers that determine success is what makes a company great.
Humans sometimes cannot see past what is directly in front of them, and that is exactly that problem with many inventory management systems that are put in place. Having backorders is a common occurrence in some companies, and backorders makes seeing what is ahead very difficult. The ensuing urge to get everything done in a timely manner is a good thing and getting all those orders out is an even better thing, but dealing with getting backorders out while planning ahead is the ideal thing. Becoming reactive to inventory is very easy and it becomes a routine, so the suggestion is that becoming proactive is even better. Becoming proactive requires planning, and planning requires forecasting. It is a ridiculous circle but it must be done, because if you don’t meet the customers demand they will switch to a different company that can meet the demand. That is a simple rule of life, if you don’t meet expectations of someone they will go elsewhere and find someone that does meet their expectations.
Lack of organization in the inventory management function can be disastrous. Making it so people fill in all the necessary functions is not the right thing to do all the time so I made an analogy of what I am talking about. It is the world series and it has gone to the seventh game while you are the manager. You know you have to win the game so you call in Roger Clemens to pitch this game because of his tenacity and his ability to pitch shutouts. You call him in and win the game and everyone goes home happy. Later in life for some reason you end up coaching hockey and you are in the Stanley cup finals and it is the seventh game and you need a shutout. The only person you know that can give you a shutout on command is Roger Clemens so you pull him in and you make him play goalie for you in the final game hoping that he gets a shutout. If you are thinking to yourself that this is the dumbest idea in the world then you are right. Just because someone is a professional in one function with a great track record does not mean that they are a great professional in another function. If other people who don’t have experience in inventory management are brought in to work in that field then they must be trained and taught to complete all of the duties that apply to said job. It is likely that Roger Clemens could become a good goalie because he obviously has the drive to be the best at what he does. The same can be said about those who are brought into inventory management. Train them and retrain them continually, Make goals for them, and treat them like they are going to become the greatest forecasters, planners, or managers ever.
The mistakes listed are repairable to some degree and need to be taken seriously because it could mean effective inventory management or crummy inventory management. It all depends on the ability to see the problem and fix it.
