1 © The Delos Partnership 2003 Customer Relationship Management Setting up the forecast process - ideas for improvement

1 © The Delos Partnership 2003

Customer Relationship Customer Relationship ManagementManagement

Setting up the forecast process

- ideas for improvement


Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

Filter Filter DemandDemand

ComputeComputeforecastforecast

CaptureCaptureActualActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Hold Demand ReviewHold Demand Review

Agree commercialAgree commercial plansplans

AgreeAgreeExceptional demandExceptional demand

AssumptionAssumptions written s written down and down and

agreedagreed

AssumptionAssumptions written s written down and down and

agreedagreed

ReviewReviewAccuracyAccuracy


Demand ControlDemand Control

CheckCheckForecastForecast

Check AbnormalCheck AbnormalDemandDemand

Receive Receive OrderOrder

100 % delivery to promise100 % delivery to promise100 % delivery to promise100 % delivery to promise

Give Customer a promiseGive Customer a promise

Check ATPCheck ATP

Agree Lead time forAgree Lead time forAbnormal demandAbnormal demand

ConsumeConsumeForecastForecast

It wasIt wasNotNot

In the In the forecastforecast


Elements to decideElements to decide

• Horizon• Unit of Measure• ‘Time Buckets’• Time Fences• Level of Detail

– Item– Family– Capacity


HorizonHorizon

• A forecast provides visibility for– Materials procurement– Internal capacity requirements– Short and long term financial projections– Suppliers’ capacity requirements

• Horizon of forecast needs to give adequate visibility


Horizon Covers All NeedsHorizon Covers All Needs

24 months gives budget and forecast year

Budget process

6 monthsgives likely

outturn

30 months rolling forecast

Materials

Capacity

Cash


Forecasting – Unit of Forecasting – Unit of MeasureMeasure

• Forecasting should be in unit of measure as sold to customer

• May need to be in aggregate where family volumes needed

• Issue – how to aggregate


Forecasting - Time BucketForecasting - Time Bucket

• Need to determine whether basic time interval is – Month– Week– Day

• If monthly does it get divided into weeks• If weekly does it get divided into days?• If weekly or daily is each week or day going

to be different


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 10 20 30 40 10 20 30 40 8 16 24 32

Actual Demand

Proj Avail Balance

90 70 40 0 65 45 15 50 42 26 2 25

Available to Promise

CumulativeATP

Master Schedule

75 75 75

Item Level ForecastItem Level Forecast

Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100



Demand Time FenceDemand Time Fence

Horizon

PLANMANAGEEXECUTE

Cumulative Lead TimeCumulative Lead Time

Add or subtractTo capacity

Strong Link to

Integrated EnterprisePlanning Process

Capacity andMaterials“firm”

Release Orders

Orders only


Factors That Determine the Factors That Determine the DetailDetail

• Requirements for planning material and capacity

• Customer service policy• Position in the supply chain• Tradeoff between ‘precision’ and

‘accuracy’– Better to be roughly right than precisely

wrong


Customer Relationship Customer Relationship StrategyStrategy

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

WhereDo you meetTheCustomer ?

StockTo Order

End itemForecast

CapacityForecast

FamilyForecast


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


CumulativeATP

Master Schedule

75 75 75

End Item Level Forecast End Item Level Forecast



Forecast ConsumptionForecast Consumption

Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 15 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

10

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


90 75 75 75

CumulativeATP

Master Schedule

75 75 75




Customer ProfileCustomer Profile

Customer X 50 per month

Customer Y 10 per month

Customer Z 5 per month

Customers A… 35 per month

Total = 100 per month

Forecast at End Item Level


Forecast ConsumptionForecast Consumption

Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45


90 75 75 75

CumulativeATP

Master Schedule

75 75 75




Forecasting Different Forecasting Different Demand StreamsDemand Streams• Allows control of demand by market

segment or customer group or customer

• Prevents over-consumption by one market or sector

• Necessary when same product goes to different market sectors (e.G. Uk/export)


In many companies multiple In many companies multiple demand streams for the same demand streams for the same

item need to be managed item need to be managed (consumed) separately and ATP (consumed) separately and ATP (available to promise) calculated (available to promise) calculated

separatelyseparately

Managing Multiple Demand Managing Multiple Demand StreamsStreams


Managing Multiple Demand Managing Multiple Demand StreamsStreams

Examples of Multiple Demand Streams– Export and UK– Different Market Sectors

• Retail/Industrial• Spares/OEM

– Different Customer Groupings• Major Accounts• Minor Accounts

– Different Customers• Large Customer A• Large Customer B• All other Customers

– Different Customer Categories• Gold Card• Silver Card


Global Supply Chain Global Supply Chain PlanningPlanningExtension of make to stock environment

Used when geography separatesmake from sell

Allows for visibility in chain to maximise inventory control


Global Supply Chain Global Supply Chain PlanningPlanning

Bill of Distribution Same Product Code :Location code needed


Distribution Planning Distribution Planning ProcessProcess

Receive ForecastReceive Forecast

Calculate PlanCalculate Plan

CaptureCaptureDataData

BALANCED PLANBALANCED PLANBALANCED PLANBALANCED PLAN

Hold Supply ReviewHold Supply Review

Transmit the planTransmit the plan

Receive Supply PlanReceive Supply Plan

Review Review actionaction

messagesmessages

Review Review actionaction

messagesmessages

ReviewReviewMessagesMessages


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Warehouse Demand

Actual Demand

Proj Avail Balance


Master Schedule

150 150 150 150 150 150

Master Schedule UKMaster Schedule UK

Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 0 25 25 25 25 25 25 25 20 20 20 20

Warehouse Demand

100

150

50 150 100 50

Actual Demand

25

Proj Avail Balance

275 150 75 50 175 150 175 100 80 60 190 170


125 0 150 0 0

Master Schedule

150 150 150 150 150

Master Schedule - UKMaster Schedule - UK

Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 5 20 20 20 20 20 20 20 20 20 20 20

Actual Demand

15

Proj Avail Balance

60 40 20 100 80 60 40 20 100 80 60 40


65 100 100

Master Schedule

100 100

Planned Release

100 100

DRP - GermanyDRP - Germany

Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80Location : 002 Germany


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 20 40 40 40 40 40 40 40 40 40 40 40

Actual Demand

20

Proj Avail Balance

50 160 120 80 190 150 110 70 180 140 110 70


70 150 150 150

Master Schedule

150

*

150 150

Planned Release

150 150

DRP SpainDRP Spain

Part Number: 12345 Lead Time: 3 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 90Location : 003 Spain

* In

Transit


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 0 0 10 10 10 10 10 10 10 10 10 10

Actual Demand

20

Proj Avail Balance

50 50 40 30 20 60 50 40 30 20 60 50


50 50 50

Master Schedule

50 50

Planned Release

50 50

DRP ItalyDRP Italy

Part Number: 12345 Lead Time: 3 periods Safety Stock: 20 Min Ord Qty: 50 On Hand: 70Location : 004 Italy


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 5 20 20 20 20 20 20 20 20 20 20 20

Actual Demand

15

Proj Avail Balance

60 40 20 100 80 60 40 20 100 80 60 40


65 100 100

Master Schedule

100 100

Planned Release

100 100

CPR – Customer ABCCPR – Customer ABC

Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80Location : 002 Customer ABC


Hierarchy of ForecastHierarchy of ForecastThe

hig

her

the

leve

l

The

more

acc

ura

te

Marketing SubFamily

MarketingFamily

£ Plan £ Plan

Production

Family

Item Number

Production

Sub Family

Item N

umber

Customer/Distribution Centre


Product VariantsProduct Variants

Blue PenPart Number 12346

Blue PenPart Number 12346

Red PenPart Number 12345

Red PenPart Number 12345

Black PenPart Number 12347

Black PenPart Number 12347

Green PenPart Number 12348

Green PenPart Number 12348

Variant Forecast Actual

Blue 40 50

Red 60 70

Black 30 20

Green 70 60

Total 200 200

How manyNibs

And

How manyCaps and barrelsNeeded ?


Planning FamilyPlanning Family

Blue OptionPart Number 12346

Blue OptionPart Number 12346

Red OptionPart Number 12345

Red OptionPart Number 12345

Black OptionPart Number 12347

Black OptionPart Number 12347

Green OptionPart Number 12348

Green OptionPart Number 12348

Common Parts46783

Common Parts46783

Pen Family43785

Pen Family43785

20 % = 0.2

30 % = 0.3

15 % = 0.15

35 % = 0.35

Forecast = 200/mth

100 % = 1.0


Modular Bill Works BestModular Bill Works Best

• If end item forecasting difficult or impossible because of number of items

• Manufacturing lead time exceeds competitive lead time


Customer Relationship Customer Relationship StrategyStrategy

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

WhereDo you meetTheCustomer ?

StockTo Order

CapacityForecast


Forecast of Capacity Forecast of Capacity

Work Centre Number : 41 Cum Lead Time : 6 periods Load Factor : 70%

Order 1456 : Item 1435 100 units 1.1 hours per unit = 110 hours

Order 1567 : Item 1325 200 units 1.2 hours per unit = 240 hours

Periods 1 2 3 4 5 6 7 8 9 10 11 12 13

Forecast 0 0 0 0 0 0 42 56 56 56 56 56 56

Actual Demand

56 56 56 56 56 56 14

Proj Avail Balance

0 0 0 0 0 0 0 0 0 0 0 0 0


42 56 56 56 56 56 56

CumulativeATP

42 98 154 210 266 322 378

Master Schedule

56 56 56 56 56 56 56 56 56 56 56 56 56


Establishing the Demand Establishing the Demand Management ProcessManagement ProcessThought needed to be given to

– Horizon– Level – planning bills, capacity or end item forecasting– Time buckets

Implementation of forecasting and DRP may require education of customer and agreement on key policies

Benefits are:– Reduced inventory– Improved customer service– Reduced effort in forecasting


Cultural Issues to faceCultural Issues to face

• Why should I bother to take it seriously ?• This is an operational issue; its nothing to do

with Sales or Marketing• Forecasting takes away time from selling• I will spend a little time now, but much later• Forecasts are best done by a system


Project OrganisationProject Organisation

STEERING COMMITTEE

PROJECT TEAM

INNOVATION

DEMAND

SUPPLY

PROJECTMANAGEMENT

SALESFORECASTING

CUSTOMERRELATIONSHIPMANAGEMENT

MASTERPRODUCTIONSCHEDULING

PROCUREMENTLEAN

AND AGILE

PERFORMANCEMEASURES

FINANCE

SSUUPPPPOORRTT

SSUUPPPPOORRTT

INTEGRATEDENTERPRISEPLANNING

SponsorSponsor

Project LeaderProject Leader

DATAACCURACY

LEANAND AGILE

SUPPLIERRELATIONSHIPMANAGEMENT


Task Team RoleTask Team Role

VISION

VISION

STRATEGY

STRATEGY

TASKTEAMS

WORKINGSOFTWARE

DETAILEDPOLICIES

ANDPROCEDURES

DETAILEDROLES

CULTURE

DETAILED

KPIS

FORECASTING

CUSTOMERSERVICE


Task TeamsTask Teams

• Translate their element of the strategy and vision into reality

• Cross-functional• Develop the policies and procedures that are

needed• Get familiar with the software, and make sure

that this integrates with policy and procedures• Develop the training material


Forecasting benefitsForecasting benefits

• What I forecast I know I can sell• Forecasting is the only way of telling the

supply side what to make or buy• Forecasting better means more cash

and more profit• Forecasting better means less waste• Having a forecast can mean telling the

customer what they need !


Forecasting more Forecasting more accuratelyaccuratelyMeans• Less Inventory• Better Customer Service• Reduced CostWhich means• More Cash• More Profit• A competitive edge

Documents

1 © The Delos Partnership 2003 Customer Relationship Management Setting up the forecast process - ideas for improvement