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Forecasting Strategies for Food Companies
How improved forecasting increases predictability and profits
Please feel free to ask questions throughout the presentation using the Q & A entry area in GoTo Webinar
Questions will all be addressed at the end of the presentation
Recordings of the presentation will be made available to all attendees
Copies of the slide decks will be made available to the attendees
Introduction
SYSPRO Software – who we are
SYSPRO in the Food Industry
Industry insights on Forecasting in the food industry
Demonstration – how Forecasting benefits entire company
Closing and Questions and Answers
Mauricio Lozano
Director of Operations for Nectar Juicery, Instructor in the BCIT Operations Management program, and industry visionary specializing in some of the most important challenges facing food manufacturers.
Steve Bassaw
Supply chain professional of 20 years whose experience includes materials management for one of BC's largest food processors and advising the BCIT Operations Management program. Steve is a Product Owner and supply chain specialist with SYSPRO Canada.
Global Organization
One of largest independent suppliers of Enterprise Business Solutions
14,500+ companies using SYSPRO Globally
Customers in 63+ countries across 6 continents
1,100+ Food and Beverage customers globally
1,300+ companies using SYSPRO in Canada
Highest customer retention in the industry
Specializing in manufacturers and wholesale distributors
A tool for making better decisions & happier customers
Look at past inventory usage ...
... to predict future needs ...
... with some adjustments for reality
Companies that have formal forecasting:
Increase inventory turns
Reduce inventory levels by over 20%
On $1 M in inventory
$200,000 injection of cash
$ 50,000 in carrying charges
Increased “Availability” by 10%
(# of sales) / (# sales + # lost sales)
$4M in sales at 30% GP = $120,000
Forecasting saves money
Forecasting
Mauricio Lozano
Instructor, Operations Management, BCIT
fore·castˈfôrˌkast/Verb
1. predict or estimate (a future
event or trend)."rain is forecast
for eastern Ohio"
synonyms:
Predict, prophesy,
prognosticate, foretell, foresee,
forewarn of "they forecast
record profits”s
noun
noun: forecast; plural noun:
forecasts
1. a prediction or estimate of
future events, especially coming
weather or a financial trend.
synonyms:
Prediction, prophecy,
forewarning, prognostication,
augury, divination, prognosis “a
gloomy forecast”
What is Forecasting?
Forecasting
Process of predicting a future event
Underlying basis of all business decisions
Sales
Marketing
Supply chain
Maintenance
Human Resources
Finance
Benefits
Sales
High service levels, require enough stock
Too much stock
Involves distressed product waste or discounted
Low stock
Involves dissatisfied customers, missed sales and bad reputation
Benefits
Marketing
Accurate budgeting for advertising
Marketing contribution planning
Knowing when and where to spend funds
Knowing when to remove spending to increase profit
Product life cycle stage
Benefits
Supply Chain
How much to produce & when to produce
Just in time management requires low levels of inventory or no inventory
Better purchasing contracts
Product storage is costly
Some supplies are sensitive to shelflife
Issues with over producing
Scrap
Setup
time
Late
deliveries
Quality
problem
s
Process
downtimeScrap
Setup
time
Late
deliveries
Quality
problem
s
Process
downtime
Inventory
level
Inventory
level
Benefits
Maintenance
When to schedule preventive maintenance
Anticipating equipment purchases
Scheduling overhauling
Project Management
Benefits
Human Resources
Right staffing level
Decisions on hiring or layoffs
Planning for vacations and holidays
Benefits
Finance
Profits planning
Earnings per share
Accurate overhead absorption
Underestimating volume can mean negative variances in utilities, taxes and salaries
Types of Forecasts by Time Horizon
Short Range
• 1 to 12 months
• Just in Time manufacturing plan
• Master Production Schedule
Medium Range
• 3 months to 3 years
• Budgeting
• Purchasing contracts
• Profits projections
Long Range
• >3 Years
• Capacity planning
• Product launches and discontinuation
Product Life Cycle
Introduction
Growth
Maturity
Decline
In what stage is your product?
Introduction Growth Maturity Decline
Moving Average
Polynomial Regression
Y = ax2 + bx + c
Linear Regression
Y = ax + b
Exponential Smoothing
Ft = Ft-1 + (At-1 – Ft-1)
Linear Regression (Trend Line)
Y = ax + b
Least Squares
Exponential Smoothing with Trend Adjustment
Ft = Ft-1 + (At-1 – Ft-1)
Tt = (Ft - Ft-1) + (1- )Tt-1
Best period to increase market share
R&D product engineering critical
Practical to change price or quality image
Strengthen niche
Cost control critical
Poor time to change image, price, or quality
Competitive costs become critical
Defend market position
Be
st
Mo
de
l to
Fo
rec
ast
Co
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y S
tra
teg
y/I
ssu
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Sales
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Forecasting issues
Using shipment history
Relying on bad data
Excessive "gut feel" overrides
Poor event planning
Senior management meddling
Failing to measure sales forecast accuracy
Safety stock based on forecast error
Tolbert, Fred. 7 sins of Sales Forecasing. APICS
Magazine.2012 | 7 | 3
Thank you
Demonstration: forecasting in SYSPRO
I worked at food manufacturing company using SYSPRO
ForecastsMaterial
Requirements Planning (MRP)
Purchasing
Production
Finance
Sales
Customer Service
BENEFIT REASON
Save time creating PO’s Forecasts drive Suggested PO’s vs. spreadsheets/winging it
Buyers more proactive, strategic Forecasts = predictability = less fire-fighting
Lower raw material costs Negotiate contract prices vs. spot market
Lower freight costs Less expediting inbound raw materials
“What-if” agility See effects of forecast changes
Less storage space needed Carry less inventory
BENEFIT REASON
Save time creating Jobs Forecasts drive Suggested Jobs vs. spreadsheets/winging it
More proactive More predictable, longerproduction runs
Lower production costs Higher throughput, fewer changeovers, less O/T
“What-if” agility See effects of forecast changes
BENEFIT REASON
More money Carry less inventory on RM and FG
More money Higher service levels to customers = higher revenue
Lower costs Supplier contract prices vs. spot market
Lower costs Less expediting of inbound raw materials and outbound sales
Lower costs Less O/T in production
Lower costs Fewer write-offs of expired items
BENEFIT REASON
Higher sales Higher service levels
Fewer lost customers Higher service levels
Saves time Automated forecasts vs. spreadsheets
Simplify your business
Support forecasting requirements
Improve productivity
Realize fast, long-term ROI
Extend insight across your organization
Rapid deployment
A well experienced, national team