Douglas Daley, Solution Specialist

Dynamics AX

Optimising your supply chain

Optimising your supply chain | 2

How much stock should I hold?

What I expect to sell before more stock is

available

+Buffer in case I sell more than expected

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How much stock should I hold?

Lead time sales

+

Safety stock

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Let’s talk safety stockHow much safety stock do I need?

Expected sa les

0 2 4 6 8 10 120

50

100

150

200

250

Expected Stock v Time

Optimising your supply chain | 5

Let’s talk safety stockHow much safety stock do I need?

Expected sa les != actua l sa les

0 2 4 6 8 10 120

50

100

150

200

250

Expected Stock v Time

0 2 4 6 8 10 120

50

100

150

200

250

Actual Stock v Time

Safety stock

Optimising your supply chain | 6

Let’s talk safety stockHow much safety stock do I need?

Expected sa les != actua l sa les

Confi dence i n hav ing enough s tock = Serv ice

leve l

Want higher serv ice leve ls? Keep more

sa fe ty stock

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Calculating safety stockThe standard AX approach

Ca lcu la te

minimums

u s ing the

safety stock

journa l .

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What we just saw

Calculate minimum stock levels based on Historical issues and receipts

Target service level

Analyse impact on inventory value

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There are some challenges with this!We used the same serv ice l eve l f o r a l l i t ems .

Even i f they a re rea l ly expens ive…

and very s low moving !

Th i s i s the hear t o f an S&OP game p lan…

But i t ignores the sa les forecast !

We have m in imums… what about maximums?

Optimising your supply chain | 10

An integrated viewFor sales and operations planning

Supply Performanc

e

Actual Sales

Demand Planning

Statistical forecast baselineManual forecast adjustment - Promotions - NPD - etc

Supply Planning

Review - Lead times - Forecast accuracy - Minimum stock - Economic order quantities

Forecast Accuracy

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Step 1: Demand planning

Use any demand forecasting tool.

If you don’t have one use standard AX 2012 R3.

What you need to know Simple demand forecasting with an Excel front end for review and

adjustment

Detects seasonality

Doesn’t incorporate promotions

2 algorithms Operational planning – short horizon

Business planning – long horizon

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Step 2: Review supplier performance Use cube

Review % on time, late, and early

Revise lead times where the statistics suggest you should

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Step 3: Review supply parameters

Lead time sales

+

Safety stock

Forecast sales within the lead time.

Service level x Confidence in Forecast x Confidence Lead time.

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The mathsSome common calculations

Item coverage minimum = safety stock + lead time

forecast sales

Item coverage maximum = minimum + economic order

quantity

Safety stock = std. dev. (forecast variance) x std. dev.

(lead time variance) x service factor x lead time factor

Service factor = function(service level) There are a number of possibilities as to what the function should be. We assumed

a the error was normally distributed and used an equivalent of the Excel function

NORMSINV

Optimising your supply chain | 15

The Dark Cockpit Principle

Use data to

turn the

lights on!

Make

information

actionable.

Focus and

automate.

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We’re forgetting something!

We used the same serv ice l eve l f o r a l l i t ems .

Even i f they a re rea l ly expens ive…

and very s low moving !

Optimising your supply chain | 17

How else can we leverage data in our supply chain?

Warehouse workforce planning Calculate average picking time

Estimate effort based on upcoming forecast

Range planning Use the inventory value cube

Identify the worst performing products based on revenue contribution

rank

Optimising your supply chain | 18

What we coveredS&OP and the Dark Cockpit Theory

Demand Forecasti

ng

Demand Planning Supply Planning

Demand Review

Inventory Planning

Workforce Planning

Range Planning

Automate

FocusFocus

Email: douglas.daley@intergen.com.auTwitter: @TeamIntergen

Thank you

THE END