In this session we look into how to leverage your data data to optimise your supply chain. Dynamics Day is Australasia's leading event for users of Microsoft Dynamics. For those of you who couldn't make it along to the event, we have made all session content available online.

1. Optimising your
supply chain
Dynamics AX
Douglas Daley, Solution Specialist

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 | 2

3. How much stock should I hold?
Lead time sales
+
Safety stock
Optimising your supply chain | 3

4. Let’s talk safety stock
How much safety stock do I need?
E xpe c t ed s a l e s
250
200
150
100
50
0
Expected Stock v Time
0 2 4 6 8 10 12
Optimising your supply chain | 4

5. Let’s talk safety stock
How much safety stock do I need?
E xpe c t ed s a l e s != a c tua l s a l e s
250
200
150
100
50
0
Expected Stock v Time
0 2 4 6 8 10 12
250
200
150
100
50
0
Actual Stock v Time
0 2 4 6 8 10 12
Safety
stock
Optimising your supply chain | 5

6. Let’s talk safety stock
How much safety stock do I need?
E xpe c t ed s a l e s != a c tua l s a l e s
Conf idenc e i n h a v i n g e n o u g h s to c k = S e r v i c e l e v e l
Wa n t h igh e r s e r v i c e l e v e l s ? Ke e p mor e s a f e t y s toc k
Optimising your supply chain | 6

7. Calculating safety stock
The standard AX approach
Ca l c u l a t e
minimums u s i n g
t h e s a f e t y s toc k
journa l .
Optimising your supply chain | 7

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 | 8

9. There are some challenges with this!
We u s e d t h e s ame s e r v i c e l e v e l f o r a l l i t ems .
E v en i f t h e y a r e r e a l l y e xpens i v e …
a n d v e r y s low mov ing !
T h i s i s t h e h e a r t of a n S&OP game pl an …
B u t i t ignor e s t h e s a l e s for e c a s t !
W e h a v e m i n i m u m s … wh a t about ma x imums ?
Optimising your supply chain | 9

10. An integrated view
For sales and operations planning
Supply
Performance
Demand
Planning
Actual
Sales
Statistical forecast baseline
Manual forecast adjustment
- Promotions
- NPD
- etc
Supply
Planning
Review
- Lead times
- Forecast accuracy
- Minimum stock
- Economic order quantities
Forecast
Accuracy
Optimising your supply chain | 10

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 | 11

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 | 12

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 | 13

14. The maths
Some 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
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15. The Dark Cockpit Principle
 Use data to
turn the lights
on!
 Make
information
actionable.
 Focus and
automate.
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16. We’re forgetting something!
We u s e d t h e s ame s e r v i c e l e v e l f o r a l l i t ems .
E v en i f t h e y a r e r e a l l y e xpens i v e …
a n d v e r y s low mov ing !
Optimising your supply chain | 16

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 | 17

18. What we covered
S&OP and the Dark Cockpit Theory
Demand Planning Supply Planning
Demand
Forecasting
Demand
Review
Inventory
Planning
Workforce
Planning
Range
Planning
Focus Focus
Automate
Optimising your supply chain | 18

19. Thank you
Email: douglas.daley@intergen.com.au
Twitter: @TeamIntergen