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Tocico2007isseasonality
- 1. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee TTTTOOOOCCCCIIIICCCCOOOO CCCCOOOONNNNFFFFEEEERRRREEEENNNNCCCCEEEE 2222000000007777 DDDDeeeeaaaalllliiiinnnngggg wwwwiiiitttthhhh sssseeeeaaaassssoooonnnnaaaalllliiiittttyyyy iiiinnnn ddddiiiissssttttrrrriiiibbbbuuuuttttiiiioooonnnn eeeennnnvvvviiiirrrroooonnnnmmmmeeeennnnttttssss Presented By: Amir Schragenheim & Amir Weisenstern, Inherent Simplicity Date: November 6th 2007 1 © 2007 Inherent Simplicity. All rights reserved.
- 2. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee DDDDDDDDiiiiiiiiffffffffffffffffeeeeeeeerrrrrrrreeeeeeeennnnnnnntttttttt SSSSSSSSeeeeeeeeaaaaaaaassssssssoooooooonnnnnnnn PPPPPPPPaaaaaaaatttttttttttttttteeeeeeeerrrrrrrrnnnnnnnnssssssss 2 © 2007 Inherent Simplicity. All rights reserved.
- 3. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee HHHHHHHHoooooooolllllllliiiiiiiiddddddddaaaaaaaayyyyyyyy////////PPPPPPPPrrrrrrrroooooooommmmmmmmoooooooottttttttiiiiiiiioooooooonnnnnnnn 3 © 2007 Inherent Simplicity. All rights reserved.
- 4. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee NNNNNNNNeeeeeeeewwwwwwww PPPPPPPPrrrrrrrroooooooodddddddduuuuuuuucccccccctttttttt IIIIIIIInnnnnnnnttttttttrrrrrrrroooooooodddddddduuuuuuuuccccccccttttttttiiiiiiiioooooooonnnnnnnn 4 © 2007 Inherent Simplicity. All rights reserved.
- 5. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee “RRRRRRRReeeeeeeevvvvvvvveeeeeeeerrrrrrrrsssssssseeeeeeee”””””””” sssssssseeeeeeeeaaaaaaaassssssssoooooooonnnnnnnnaaaaaaaalllllllliiiiiiiittttttttyyyyyyyy 5 © 2007 Inherent Simplicity. All rights reserved.
- 6. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee OOOOOOOOuuuuuuuurrrrrrrr ffffffffooooooooccccccccuuuuuuuussssssss 6 © 2007 Inherent Simplicity. All rights reserved.
- 7. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee SSSSSSSShhhhhhhhaaaaaaaarrrrrrrrpppppppp DDDDDDDDeeeeeeeemmmmmmmmaaaaaaaannnnnnnndddddddd CCCCCCCChhhhhhhhaaaaaaaannnnnnnnggggggggeeeeeeeessssssss Sharp Demand Increase Sharp Demand Decrease 7 © 2007 Inherent Simplicity. All rights reserved.
- 8. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee HHHHHHHHoooooooowwwwwwww wwwwwwwwiiiiiiiillllllllllllllll DDDDDDDDBBBBBBBBMMMMMMMM ccccccccooooooooppppppppeeeeeeee???????? 8 © 2007 Inherent Simplicity. All rights reserved.
- 9. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee DDDDDDDDBBBBBBBBMMMMMMMM • Assumptions − Demand is continuous • Benefits − Highly reactive − Pushes for a short replenishment time − Logic is simple to explain − Stable (doesn’t change every day) 9 © 2007 Inherent Simplicity. All rights reserved. • Shortcomings − Disregards knowledge of future − Adjusts slowly to sudden changes − Disregards long history
- 10. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee TTTTTTTTrrrrrrrraaaaaaaaddddddddiiiiiiiittttttttiiiiiiiioooooooonnnnnnnnaaaaaaaallllllll ffffffffoooooooorrrrrrrreeeeeeeeccccccccaaaaaaaasssssssstttttttt • Assumptions − Everything can be predicted − People will trust the output • Benefits − Can take into account knowledge about the future − Takes into account long history − Provides the best theoretical result if all data is accurate, and if done frequently enough on all SKUs 10 © 2007 Inherent Simplicity. All rights reserved. • Shortcomings − Usually predicts only the average sales and does not include any estimation of the forecasting error − Hard to understand for many people – causing overriding of results − Subjective and unstable – different user inputs would provide different results − Every recalculation of the forecast tends to be disruptive
- 11. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee CCCCCCCCoooooooommmmmmmmppppppppaaaaaaaarrrrrrrriiiiiiiissssssssoooooooonnnnnnnn ffffffffoooooooorrrrrrrr ddddddddiiiiiiiiffffffffffffffffeeeeeeeerrrrrrrreeeeeeeennnnnnnntttttttt sssssssscccccccceeeeeeeennnnnnnnaaaaaaaarrrrrrrriiiiiiiioooooooossssssss Forecast DBM Continuous Demand Would give different daily Would give the best results – resulting in an unstable system and noise 11 © 2007 Inherent Simplicity. All rights reserved. results – a stable system that changes and adjusts periodically only when needed Sharp Demand Changes Would give a fair estimation of the needed stocks at each location Would provide good results only when the replenishment time is short relative to the degree of change
- 12. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee WWWWWWWWhhhhhhhheeeeeeeennnnnnnn ttttttttoooooooo uuuuuuuusssssssseeeeeeee eeeeeeeeaaaaaaaacccccccchhhhhhhh • Use DBM whenever expectations are for fairly continuous demand • When a sharp demand change is expected – plan the CWH/RWH stocks according to forecast • Revert back to DBM as quickly as possible to adjust to reality 12 © 2007 Inherent Simplicity. All rights reserved.
- 13. TTTTTTTThhhhhhhheeeeeeee IIIIIIIInnnnnnnnhhhhhhhheeeeeeeerrrrrrrreeeeeeeennnnnnnntttttttt SSSSSSSSiiiiiiiimmmmmmmmpppppppplllllllliiiiiiiicccccccciiiiiiiittttttttyyyyyyyy sssssssstttttttteeeeeeeeppppppppssssssss TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee 1) Stock Buildup −Order the needed stock at least a replenishment time in advance – see whether you need to order in small batches 2) Waiting for stock −Waiting for stocks to arrive using the forecasted buffer size – replenishing within the period, but freezing DBM 3) Inside the high demand −Act according to DBM 13 © 2007 Inherent Simplicity. All rights reserved.
- 14. TTTTTTTThhhhhhhheeeeeeee IIIIIIIInnnnnnnnhhhhhhhheeeeeeeerrrrrrrreeeeeeeennnnnnnntttttttt SSSSSSSSiiiiiiiimmmmmmmmpppppppplllllllliiiiiiiicccccccciiiiiiiittttttttyyyyyyyy sssssssstttttttteeeeeeeeppppppppssssssss TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee 4) Stock Builddown −Plan to reduce the buffer size enough time in advance to not stay with too much inventory − Thus canceling the replenishment process from the point this was activated until the stock in the system is below the new lower level 14 © 2007 Inherent Simplicity. All rights reserved. 5) Back to normal −Return to normal behavior – replenishing and acting according to DBM
- 15. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee SSSSSSSShhhhhhhhaaaaaaaarrrrrrrrpppppppp DDDDDDDDeeeeeeeemmmmmmmmaaaaaaaannnnnnnndddddddd CCCCCCCChhhhhhhhaaaaaaaannnnnnnnggggggggeeeeeeeessssssss 15 © 2007 Inherent Simplicity. All rights reserved. Stock Buildup Waiting For Stock Inside The Demand Stock Builddown Back to normal
- 16. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee EEEEEEEExxxxxxxxaaaaaaaammmmmmmmpppppppplllllllleeeeeeee • A short-sleeve shirt is sold throughout the year at a rate of 10 shirts/day • From May, it’s sold at a rate of 40 shirts/day • During September it’s sold at a decreasing rate of 5 shirts less each week, until mid-October • The replenishment time is 10 working days 16 © 2007 Inherent Simplicity. All rights reserved.
- 17. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee EEEEEEEExxxxxxxxaaaaaaaammmmmmmmpppppppplllllllleeeeeeee 17 © 2007 Inherent Simplicity. All rights reserved. Stock Buildup Waiting For Stock Inside The Demand Stock Builddown Back to normal
- 18. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee AAAAAAAAlllllllltttttttteeeeeeeerrrrrrrrnnnnnnnnaaaaaaaattttttttiiiiiiiivvvvvvvveeeeeeee ttttttttrrrrrrrraaaaaaaannnnnnnnssssssssppppppppoooooooorrrrrrrrttttttttaaaaaaaattttttttiiiiiiiioooooooonnnnnnnn • Shortening replenishment time is important in regular supply chain environments • When seasonality is active, it’s absolutely a must if it’s possible – enabling minimum forecasting and using the power of DBM • The cost of the upgraded method per unit should be considered against the T of the unit 18 © 2007 Inherent Simplicity. All rights reserved.
- 19. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee AAAAAAAAlllllllltttttttteeeeeeeerrrrrrrrnnnnnnnnaaaaaaaattttttttiiiiiiiivvvvvvvveeeeeeee ttttttttrrrrrrrraaaaaaaannnnnnnnssssssssppppppppoooooooorrrrrrrrttttttttaaaaaaaattttttttiiiiiiiioooooooonnnnnnnn • In most cases there will be a clear cut between the methods − Keeping high inventories − Using the upgraded transportation − Losing the sales • If not – some financial calculations can reveal the direction of the solution 19 © 2007 Inherent Simplicity. All rights reserved.
- 20. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee AAAAAAAAbbbbbbbboooooooouuuuuuuutttttttt [[[[[[[[PPPPPPPPrrrrrrrreeeeeeeesssssssseeeeeeeennnnnnnntttttttteeeeeeeerrrrrrrr]]]]]]]] •Amir Schragenheim •President of Inherent Simplicity – a leading TOC software company for operations & distribution •Previously developed several 20 © 2007 Inherent Simplicity. All rights reserved. computerized TOC educational and simulation tools for operations, distribution and project management
- 21. TTTTOOOOCCCCIIIICCCCOOOO 2222000000007777 CCCCoooonnnnffffeeeerrrreeeennnncccceeee AAAAAAAAbbbbbbbboooooooouuuuuuuutttttttt [[[[[[[[PPPPPPPPrrrrrrrreeeeeeeesssssssseeeeeeeennnnnnnntttttttteeeeeeeerrrrrrrr]]]]]]]] •Amir Weisenstern •President of Inherent Simplicity – a leading TOC software company for operations & distribution •Previously founded Invoke 21 © 2007 Inherent Simplicity. All rights reserved. solutions - developed a breakthrough solution for research over the internet