Escolar Documentos
Profissional Documentos
Cultura Documentos
Abstract
Retailers are demanding that vendors help streamline inventory at both the distribution center and store level. Usually, the retailers forecasting and replenishment system generates orders based on the observed demand which is current deseasonalized demand plus trend plus predictable seasonal fluctuations. For several years now, INFOREM (Inventory Forecasting and Replenishment Module) has been the replenishment application of choice by many retailers, such as Walmart, Target, Kmart, Safeway, etc. Understanding key INFOREM forecasting concepts will lead to the development of more accurate vendor demand forecasts. During this presentation learn the important concepts that drive INFOREMs forecasting process.
Introduction
Why even discuss INFOREM specifically?
Some of the largest retailers use INFOREM to replenish hundreds of stores. Below is a short list of retailers including 2008 Sales and number of stores*
Wal-mart Target Safeway Macys Kmart Kohls $405.607 billion $64.948 billion $44.104 billion $24.892 billion $18.0 billion (Est.) $16.389 billion 7,262 stores 1,591 stores 1,743 stores 853 stores 1,360 stores (Est.) 929 stores
Total Combined 2008 Sales = $573.94 billion Total Combined Stores = 13,738 stores
*Note: Number of stores is from Store Magazine Top 100 Retail List 2008 published in its July 2008 issue at http://www.stores.org/pdf/08TOP100.pdf.
Agenda
Background Forecasting Concepts Ordering Concepts How can the retail vendor apply these concepts?
Demand Planning Simulation Working with the retailers replenishment team
Background
Merchandise Planning & Allocation
Long Term Demand & Supply Planning
Sales, GM, and Inventory Turns Goal Driven
Background
Goal is to improve Forecast Accuracy
Forecast Error (MAPE) with One-Month Lag
Industry Bulk Chemicals Consumer Goods High Tech Range 24% to 10% 40% to 14% 45% to 4% Median 11% 26% 28%
Source: Lora Cecere, Debra Hoffman, Roddy Martin, and Laura Preslan, AMR Research, AMR Benchmark Analytix data in The Handbook for Becoming Demand Driven, July 2005.
Background
INFOREM
Acronym for Inventory Forecasting and Replenishment Module Created by IBM in the 1970s Probable offspring of IBMs 1966 IMPACT Inventory Program & Control Techniques INFOREM Purchased by i2 Technology in 2000 Update: JDA Acquires i2 Technologies January, 2010; JDA owns rights to INFOREM
The
INFOREM
Policy
system
DDU FEX RDR Policy File
AUX
INFOREM Calculations
Outputs
Recycle Aux
Agenda
Background Forecasting Concepts Ordering Concepts How can the retail vendor apply these concepts?
Demand Planning Simulation Working with the retailers replenishment team
DD X BI = Sales Forecast
DD is Deseasonalized Demand BI is the Base Index
2.0
1.5
Base Index
1.0 0.5 0.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
Fiscal Week
DD X BI = Sales Forecast
DD is Deseasonalized Demand BI is the Base Index
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
CDD =
CPS BI
where .1 < TS < .9 and | | denotes absolute value MSDTSt = Mean Signed Deviation for Tracking Signal (mean forecast error) MADTSt = Mean Average Deviation for Tracking Signal (mean absolute forecast error)
t = TSt x DAMP
Trigg DW, Leach AG. 1967. Exponential smoothing with an adaptive response rate. Operational Research Quarterly 18: 53-59.
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
Calculating a New DD
Output Old DD Input CPS Step 1 Bypass Codes No Update No Update / Update ? Step 2 Update Demand Filter Limits No Update
No Update / Update ?
Update
Final New DD Output DD Change Restrictions Step 4 New DD Input / Output DD Update Step 3 VRS
Step 4: DD Change Restriction puts in place limits to regulate the up and down movement of the DD
Agenda
Background Forecasting Concepts Ordering Concepts How can the retail vendor apply these concepts?
Demand Planning Simulation Working with the retailers replenishment team
The
INFOREM
Policy
system
DDU FEX RDR Policy File
AUX
INFOREM Calculations
Outputs
Moment of Truth
Recycle Aux
Order Paths
Independent SKU
Non-Flow Flow JIT
Group of SKUs
Vendor Direct
NonAggregate DC Orders
Aggregate
Aggregate
DC Orders
DC Orders
Store Orders
Store Orders
Order Paths
Group of SKUs Independent SKU
Vendor Direct
Non-Flow
Flow
JIT
NonAggregate DC Orders
Aggregate
Aggregate
DC Orders
DC Orders
Store Orders
Store Orders
Order Paths
Independent SKU
Non-Flow Flow JIT
Group of SKUs
Vendor Direct
NonAggregate DC Orders
Aggregate
Aggregate
DC Orders
DC Orders
Store Orders
Store Orders
Stores
Legend
National DC Regional DCs Tier 2 Regional DCs Tier 3
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
Loop 1
Loop 2
No
Has review time arrived?
Yes
No
End Is Avail < OP? Yes Compute OUTL Compute OQ End Compute Order Point (OP)
AVAIL (Available Inventory) = OH (On Hand) + OO (On Order) - COMSTK (Committed Stock) COMSTK refers to store orders that are committed for various reasons i.e. Promotional Allocation RTF (Review Time Factor) - A default value of .5 is usually used RT (Review Time) - Number of days between INFOREM reviews LT (Lead Time) - Number of days between order review and goods being available for sale ( store level) or distribution (DC level) SSTOCK (Safety Stock) - Amount of merchandise kept to protect against out of stock condition CSTOCK (Counter Stock) - The minimum amount of product you want to have on hand when the next order arrives (presentation)
LT (Lead Time) - Number of days between order review and goods being available for sale ( store level) or distribution (DC level) OSTRAT (Order Strategy) - Number of days an order quantity should last upon
receipt
SSTOCK (Safety Stock) - Amount of merchandise kept to protect against out of stock condition CSTOCK (Counter Stock) - The minimum amount of product you want to have on hand when the next order arrives (presentation) OQ (Order Quantity) AVAIL (Available Inventory) = OH (On Hand) + OO (On Order) - COMSTK (Committed Stock)
Safety Stock
Safety Stock is an additional layer of inventory added to a store order point to cover forecast variance to actual sales in order to prevent store out of stocks
The Mean Absolute Deviation for Safety Stock (MADSS) is the average difference between forecasted demand and actual sales Safety Stock is controlled by forecast errors, service level objectives, and lead time variations
Agenda
Background Forecasting Concepts Ordering Concepts How can the retail vendor apply these concepts?
Demand Planning Simulation Working with the retailers replenishment team
Non-Flow
Flow
JIT
Vendor Direct
NonAggregate DC Orders
Aggregate
Aggregate
DC Orders
DC Orders
Store Orders
Store Orders
Tier 2
Retail Vendor Tier 3
Stores
Legend
National DC Regional DCs Tier 2 Regional DCs Tier 3
Tier 2
Retail Vendor Tier 3
Stores
Legend
National DC Regional DCs Tier 2 Regional DCs Tier 3
Agenda
Background Forecasting Concepts Ordering Concepts How can the retail vendor apply these concepts?
Demand Planning Simulation Working with the retailers replenishment team
Agenda
Background INFOREM Forecasting Concepts INFOREM Ordering Concepts How can the retail vendor apply these INFOREM concepts?
Demand Planning Simulation Working with the retailers replenishment team
End
Email me at james.ratliff@observeddemand.com
Or Visit my website at www.observeddemand.com Or call me at 312-330-2889 Check out my profile at LinkedIn.com
http://www.linkedin.com/in/jamesratliffprofile