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Douglas Daley, Solution Specialist Dynamics AX Optimising your supply chain
| Date post: | 18-Dec-2014 |
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Technology |
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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
Optimising your supply chain | 3
How much stock should I hold?
Lead time sales
+
Safety stock
Optimising your supply chain | 4
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
Optimising your supply chain | 7
Calculating safety stockThe standard AX approach
Ca lcu la te
minimums
u s ing the
safety stock
journa l .
Optimising your supply chain | 8
What we just saw
Calculate minimum stock levels based on Historical issues and receipts
Target service level
Analyse impact on inventory value
Optimising your supply chain | 9
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
Optimising your supply chain | 11
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
Optimising your supply chain | 12
Step 2: Review supplier performance Use cube
Review % on time, late, and early
Revise lead times where the statistics suggest you should
Optimising your supply chain | 13
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.
Optimising your supply chain | 14
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.
Optimising your supply chain | 16
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
THE END
