Measuring Forecast Accuracy

Supply Chain Forecast Accuracy is usually measured with Mean Absolute Percent Error or MAPE, the average of percentage errors. But there are several other metrics to consider. Here’s an example …

Kanban and Sustainability

Dear Larry, Andrew and Guanair; How are you doing ? I would like to share with you that We Won the Whirlpool award Sustainability-2013 , among 536 suppliers and 55 projects, With our project about plastic returnable box saving industrial waste (avoid 75000 cardboard boxes /2500 wood pallets /50 km of plastic wrap /40 ton… [Read More]

Demand Segmentation – one size fits none

We know better than to try to force fit strategies yet time and again we find businesses planning and managing their processes with a ‘one size fits all’ approach.  Hospital services, insurance underwriting, pharmaceutical production, consumer electronics assembly, integrated supply chain services all struggle with finding the right balance of specialization and common process.  At… [Read More]

Lean Forecasting

Why can’t Sales give us a decent forecast?  Paraphrasing George E.P. Box, “All forecasts are wrong, some are useful.”  If forecasts are wrong, then why forecast?  Supply chain lead time is often much longer than the customer is willing to wait, and so the business carries inventory somewhere, and inventory is a waste.  The Lean… [Read More]

Safety Stock

Over time, inventory goes up and down.  As customer order shipments are made inventory transactions subtract the ship quantity from the quantity on hand.  When production is made or goods received into the warehouse the quantity on hand goes up.  This up/down cycle can be thought of as a ‘saw tooth’.  Except it’s never as… [Read More]

Material Classification Logic

Bruce asked “Do any of you have any standard material classification logic that you have used.  I’m working with a client to classify all of the parts they purchase.  In the past I’ve used some standards from NAPM but I can’t seem to find them now on the ISM site.” I thought for a moment… [Read More]

Square Root Law – inventory in multiple locations

Got asked what would happen to inventory when the number of stocking locations change.  I thought for a minute and remembered a quick rule of thumb … The Inventory Square Root Law states that … Average inventory increases proportionally  to the square root of the number of locations in which inventory is held. X2 =… [Read More]

Safety Stock to Bridge the Forecast-Accuracy Gap

(From David McPhetrige, founder of TopDown Lean Systems, LLC, providing correct, comprehensive, multi-attribute safety stock analysis, http://topdownleansystems.com.) Surveys indicate that even world-class companies have average forecast accuracy in only the high 70%’s, especially at the SKU or component level that makes or breaks service levels and financial performance. Contributors to forecast inaccuracy include factors that… [Read More]

Total Flow Management

Euclides A. Coimbra and his associates at the Kaizen Institute have created a wonderful and detailed work on the application of continuous improvement to supply chains.  Here is a full exploration and application of lean from end to end of the extended value stream that they call Total Flow Management.  Two thumbs up! Some of… [Read More]

Replenishment Strategies

Determining an appropriate production model starts with Demand Profile and Demand Segmentation.  High volume low variability items, and low volume high variability items behave very differently.  How to decide if a particular product is a candidate for a one piece flow cell or a craftsmen job bench?  Look to the coefficient of variation for a… [Read More]