Tailored transportation is the use of different transportation modes and networks based on product and customer characteristics. Most firms sell a variety of products and serve many different customer segments. A firm that sells office supplies and furniture will have a very different tailored transportation strategy than a firm that sells bulk oil products.
A firm can meet customer needs at a lower cost by using tailored transportation to provide the appropriate transportation choice based on customer and product characteristics. There are numerous forms of tailored transportation in supply chains, including tailored transportation by customer density and distance, tailored transportation by size of customer, and tailored transportation by product demand and value. For example, tailored transportation based on customer density and distance can look like this:
Short Distance:
High density - private fleet with milk runs
Medium density - third party milk runs
Low density - third party milk runs or LTL carrier
Medium distance:
High density - cross dock with milk runs
Medium density - LTL carrier
Low density - LTL or package carrier
Long distance:
High density - cross dock with milk runs
Medium density - LTL or package carrier
Low density - package carrier
The key point is that tailoring transportation based on customer density and distance, customer size, or product demand and value allows a supply chain to achieve appropriate responsiveness and cost.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.
Monday, September 24, 2007
Sunday, September 23, 2007
Demand Forecasting Methods
There are as many demand forecasting methods as there are companies doing demand forecasting. We think that is great, a company that is working to develop and implement an effective demand planning work process should take on an appropriate demand forecasting methodology and "tweak" it to make it effective for them. Different companies have different factors that influence demand - seasonality, interest rates, demographics, etc. There are however, four basic methods of forecasting customer demand:
- Qualitative forecasts, which are subjective and typically rely on human judgement and opinions to make a forecast. This method is appropriate when there is little or no historical data available, or when experts have market intelligence that is critical to making a forecast.
- Time series forecasting methods use historical demand to make a forecast. These are typically based on the assumption that past demand history is a good indicator of future demand. Time series forecasts are appropriate when the economic environment is stable, and the pattern of basic demand does not vary significantly from one year to the next. This is the simplest method to implement and can serve as a good starting point for a demand forecast.
- Casual forecasting methods involve assuming demand patterns correlate highly with certain factors in the economic environment, the state of the economy, interest rates, etc. For example, if product pricing is strongly correlated with demand, a company can use casual methods to determine the impact of price promotions on demand.
- Simulation forecasting methods attempt to imitate the customer choices that give rise to demand to arrive at an accurate demand forecast. Using simulation methods, a company can combine time series and casual methods, as well as specific customer input from sales and marketing.
A company may find it difficult to decide which method is most appropriate for forecasting demand. In fact, using multiple forecasting methods, and then using the combination of their forecasts as the actual forecast is usually the best method. That is why we advocate customizing a demand planning process to fit every unique client.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
- Qualitative forecasts, which are subjective and typically rely on human judgement and opinions to make a forecast. This method is appropriate when there is little or no historical data available, or when experts have market intelligence that is critical to making a forecast.
- Time series forecasting methods use historical demand to make a forecast. These are typically based on the assumption that past demand history is a good indicator of future demand. Time series forecasts are appropriate when the economic environment is stable, and the pattern of basic demand does not vary significantly from one year to the next. This is the simplest method to implement and can serve as a good starting point for a demand forecast.
- Casual forecasting methods involve assuming demand patterns correlate highly with certain factors in the economic environment, the state of the economy, interest rates, etc. For example, if product pricing is strongly correlated with demand, a company can use casual methods to determine the impact of price promotions on demand.
- Simulation forecasting methods attempt to imitate the customer choices that give rise to demand to arrive at an accurate demand forecast. Using simulation methods, a company can combine time series and casual methods, as well as specific customer input from sales and marketing.
A company may find it difficult to decide which method is most appropriate for forecasting demand. In fact, using multiple forecasting methods, and then using the combination of their forecasts as the actual forecast is usually the best method. That is why we advocate customizing a demand planning process to fit every unique client.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Components of a Great Demand Forecast
We like to frequently talk about demand forecasting; why? - because many, many people say that it cannot be done. Of course it can be done, and done well. Perfectly? No, all demand forecasts are wrong, but having a disciplined demand forecasting process can have a significant impact on the bottom line - reduced inventories, efficient capacity utilization, and improved customer service. Demand forecasting is not magic or "art" and usually begins with interpreting past demand correctly.
The information that a firm knows about customers past behaviour sheds light on their future behaviour, as well as the responses they will have based on the firms actions. Good demand forecasting involves a firm identifying the factors that influence future demand and then determine the relationship between these factors and future demand. Developing a good demand planning process requires a firm to be knowledgeable about numerous factors that relate to the demand process, including components like:
- Past demand
- Planned advertising or marketing efforts
- Planned price changes
- Expected changes in supply of raw materials, components, labor and logistics
- State of the local, regional, and national economy
- Actions by competitors
A firm must take into account these and other factors, and clearly understand past actions and customer demand, before it can select an appropriate forecasting methodology.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
The information that a firm knows about customers past behaviour sheds light on their future behaviour, as well as the responses they will have based on the firms actions. Good demand forecasting involves a firm identifying the factors that influence future demand and then determine the relationship between these factors and future demand. Developing a good demand planning process requires a firm to be knowledgeable about numerous factors that relate to the demand process, including components like:
- Past demand
- Planned advertising or marketing efforts
- Planned price changes
- Expected changes in supply of raw materials, components, labor and logistics
- State of the local, regional, and national economy
- Actions by competitors
A firm must take into account these and other factors, and clearly understand past actions and customer demand, before it can select an appropriate forecasting methodology.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Saturday, September 22, 2007
Demand Forecasting - Part 2
There are certain characteristics of demand forecasting that supply chain managers should keep in mind:
- Forecasts are always wrong. Forecasts should include both the expected value and a measure of forecast error. If we forecast sales of a certain SKU to be between 100 and 1900 units, and another forecaster estimates sales to be between 900 and 1100, both forecasts expect average sales of 1000, but the sourcing strategies for the two scenarios would be very different.
- Long term forecasts are usually much less accurate than short term forecasts. This is why like to "tweak" longer term forecasts with monthly and/or weekly planning as we develop sourcing and production schedules.
- Aggregate forecasts are usually much more accurate than disaggregated forecasts. It is usually much easier to forecast the annual sales of a company than it is to forecast demand for a given product, or even annual demand at the SKU level. The greater degree of aggregation, the more accurate the forecasts.
Tomorrow we will review how to deal with forecast error, components of a good forecast, and the benefits/limitations of various forecasting methods.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
- Forecasts are always wrong. Forecasts should include both the expected value and a measure of forecast error. If we forecast sales of a certain SKU to be between 100 and 1900 units, and another forecaster estimates sales to be between 900 and 1100, both forecasts expect average sales of 1000, but the sourcing strategies for the two scenarios would be very different.
- Long term forecasts are usually much less accurate than short term forecasts. This is why like to "tweak" longer term forecasts with monthly and/or weekly planning as we develop sourcing and production schedules.
- Aggregate forecasts are usually much more accurate than disaggregated forecasts. It is usually much easier to forecast the annual sales of a company than it is to forecast demand for a given product, or even annual demand at the SKU level. The greater degree of aggregation, the more accurate the forecasts.
Tomorrow we will review how to deal with forecast error, components of a good forecast, and the benefits/limitations of various forecasting methods.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Friday, September 21, 2007
Demand Forecasting in a Supply Chain - Part 1
Forecasting future demand is critical to a supply chain managers decision making and planning processes. There are numerous ways of predicting future demand based on historical demand information. More importantly, there are also many ways to forecast demand AND estimate a forecasts accuracy.
Production and distribution decisions are critical for a company's supply chain, but world class firms use forecasts of future demand as the basis for many other decisions made in the "push pull" phase of their supply chain. Important decisions by functional area that depend on demand forecasts include:
- Production: Scheduling, inventory control, aggregate planning.
- Marketing: Sales force allocation, promotions, new product introduction.
- Finance: Plant and equipment investment, budgetary planning.
- Personnel: Workforce planning, hiring, reductions in work force.
Ideally, supply chain decisions should not be segregated by function, as they are highly interrelated - and should be made jointly. Mature products with stable demand are the easiest to forecast. Forecasting and the corresponding management decisions are much more (if not extremely) difficult when either the supply of raw materials or the demand of finished products is highly variable. In highly variable, or seasonal demand environments forecasting demand is critical to make sure a manufacturing firm does not over or under produce, since there is little chance to recover. Ideally supply exactly matches demand.
More on this complex subject tomorrow - Characteristics of great forecasts...
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Production and distribution decisions are critical for a company's supply chain, but world class firms use forecasts of future demand as the basis for many other decisions made in the "push pull" phase of their supply chain. Important decisions by functional area that depend on demand forecasts include:
- Production: Scheduling, inventory control, aggregate planning.
- Marketing: Sales force allocation, promotions, new product introduction.
- Finance: Plant and equipment investment, budgetary planning.
- Personnel: Workforce planning, hiring, reductions in work force.
Ideally, supply chain decisions should not be segregated by function, as they are highly interrelated - and should be made jointly. Mature products with stable demand are the easiest to forecast. Forecasting and the corresponding management decisions are much more (if not extremely) difficult when either the supply of raw materials or the demand of finished products is highly variable. In highly variable, or seasonal demand environments forecasting demand is critical to make sure a manufacturing firm does not over or under produce, since there is little chance to recover. Ideally supply exactly matches demand.
More on this complex subject tomorrow - Characteristics of great forecasts...
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Thursday, September 20, 2007
Can we REALLY Develop a Strategic Training Plan?
You bet! The journey toward operational excellence involves, and is heavily reliant on a pervasive and effective training effort at all levels - in all disciplines. As you plan your operational excellence effort, a great training framework, or "strategic training plan" should include the following elements:
- Establish Corporate objectives: return on assets, unplanned downtime less than 10% etc.
- Analyze the skills necessary to achieve these objectives, given your current state.
- Identify your current skills inventory - types and quantities.
- Review anticipated attrition, focusing especially on workforce demographics.
- Review planned changes to processes and equipment and the resulting training needs.
- Do not forget to include "soft skills" training: team building, conflict resolution, etc.
- Review regulatory and legal training requirements.
- Perform a gap analysis of the shortfall between skills -quantities, as well as specific regulatory requirements. Focus training on losses from ideal.
- Develop a strategic training plan including budgets, timing, metrics, priorities, etc.
- Establish clear expectations and outcomes from the training effort, and measure them.
- Recognize that a great training effort involves exposing people to principles, methods, techniques, etc and the real learning does not occur until they actually practice the training.
- Repeat the above steps - at least annually!
These steps, and others as determined by your specific plant culture, can help you develop a strategic training plan. This means developing a strategic training plan vs a reactive, or "what do we have to train on to prevent the errors we are seeing" type culture.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
- Establish Corporate objectives: return on assets, unplanned downtime less than 10% etc.
- Analyze the skills necessary to achieve these objectives, given your current state.
- Identify your current skills inventory - types and quantities.
- Review anticipated attrition, focusing especially on workforce demographics.
- Review planned changes to processes and equipment and the resulting training needs.
- Do not forget to include "soft skills" training: team building, conflict resolution, etc.
- Review regulatory and legal training requirements.
- Perform a gap analysis of the shortfall between skills -quantities, as well as specific regulatory requirements. Focus training on losses from ideal.
- Develop a strategic training plan including budgets, timing, metrics, priorities, etc.
- Establish clear expectations and outcomes from the training effort, and measure them.
- Recognize that a great training effort involves exposing people to principles, methods, techniques, etc and the real learning does not occur until they actually practice the training.
- Repeat the above steps - at least annually!
These steps, and others as determined by your specific plant culture, can help you develop a strategic training plan. This means developing a strategic training plan vs a reactive, or "what do we have to train on to prevent the errors we are seeing" type culture.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
Sunday, September 16, 2007
Scheduled and Unscheduled Downtime
Downtime, both scheduled and unscheduled, are frequently -but incorrectly - viewed as the responsibility of the maintenance department. Unscheduled downtime is typically for reactive maintenance - breakdowns or "emergencies." Scheduled downtime is usually for preventive maintenance, project work, or planned maintenance. Operational excellence has us working to minimize or eliminate unscheduled downtime, and optimize scheduled downtime by minimizing downtime for any given goal.
In our experience, a great deal of unscheduled downtime for equipment maintenance has a root cause associated with poor operating practice - running pumps dry, operating conveyors without routinely adjusting tracking, or even poor operator preventive maintenance practices (lubrication etc). Operational excellence requires operations and maintenance work together as a team to properly identify the root causes of unscheduled downtime and work together to eliminate it.
Properly done, losses due to equipment downtime can be minimized and support costs in manufacturing costs, delivery performance, time delays, and inventory planning can be reduced through increased reliability.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
In our experience, a great deal of unscheduled downtime for equipment maintenance has a root cause associated with poor operating practice - running pumps dry, operating conveyors without routinely adjusting tracking, or even poor operator preventive maintenance practices (lubrication etc). Operational excellence requires operations and maintenance work together as a team to properly identify the root causes of unscheduled downtime and work together to eliminate it.
Properly done, losses due to equipment downtime can be minimized and support costs in manufacturing costs, delivery performance, time delays, and inventory planning can be reduced through increased reliability.
Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.
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