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Forecasting strategies for food companies
- 1. Forecasting Strategies for Food Companies www.syspro.com Copyright © 2014 SYSPRO All rights reserved. How improved forecasting increases predictability and profits
- 2. 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
- 3. 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
- 4. 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.
- 5. 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
- 7. A tool for making better decisions & happier customers Look at past inventory usage ... ... to predict future needs ... ... with some adjustments for reality
- 8. 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
- 9. Forecasting Mauricio Lozano Instructor, Operations Management, BCIT
- 10. fore·cast ˈfôrˌkast/ 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
- 12. Forecasting Process of predicting a future event Underlying basis of all business decisions Sales Marketing Supply chain Maintenance Human Resources Finance
- 13. 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
- 14. 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
- 15. 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
- 16. Issues with over producing Scrap Setup time Quality problem Late s deliveries Process downtime Scrap Setup time Quality problem Late s deliveries Process downtime Inventory level Inventory level
- 17. Benefits Maintenance When to schedule preventive maintenance Anticipating equipment purchases Scheduling overhauling Project Management
- 18. Benefits Human Resources Right staffing level Decisions on hiring or layoffs Planning for vacations and holidays
- 19. Benefits Finance Profits planning Earnings per share Accurate overhead absorption Underestimating volume can mean negative variances in utilities, taxes and salaries
- 20. 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
- 21. Product Life Cycle Introduction Growth Maturity Decline In what stage is your product?
- 22. 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 Best period to increase market share R&D product engineering critical Exponential Smoothing with Trend Adjustment Ft = Ft-1 + (At-1 – Ft-1) Tt = (Ft - Ft-1) + (1- )Tt-1 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 Company Strategy/Issues Best Model to Forecast Sales x y nx y x nx b i n i i i n i a y bx
- 23. 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
- 24. Thank you
- 25. Demonstration: forecasting in SYSPRO I worked at food manufacturing company using SYSPRO
- 26. Forecasts Material Requirements Planning (MRP) Purchasing Production Finance Sales Customer Service
- 29. 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
- 30. BENEFIT REASON Save time creating Jobs Forecasts drive Suggested Jobs vs. spreadsheets/winging it More proactive More predictable, longer production runs Lower production costs Higher throughput, fewer changeovers, less O/T “What-if” agility See effects of forecast changes
- 31. 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
- 32. BENEFIT REASON Higher sales Higher service levels Fewer lost customers Higher service levels Saves time Automated forecasts vs. spreadsheets
- 33. 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
- 35. www.syspro.com Copyright © 2014 SYSPRO All rights reserved.