Supply Chain Free Consulting
Why ‘value’ demand forecast at a warehouse/factory ‘level’ when forecast by sense implies forecast of market demand? Forecast OF ‘customer’/region /market demand’.
Can’t the supply plan determine where to supply from? Esp. in a million-dollar software used by two and a half guys in the company?
Answer
IF there are multiple possibilities of source of supply incl. supply from external locations / internal production (what’s called inhouse manufacturing) / subcontractor locations (what’s called special procurement in SAP) / drop ship / anonymous location ship / some other virtual location ship, you need to let the independence of demand prevail. Because you TEND TO make a service level distinction between customers even when anonymous/aggregate (summed up from bottom) forecast drives production and distribution.
So, you need to remodel your supply network by GROUPING the customers in some meaningful way. By size, distance, importance, channels, value, volume, any other criteria relevant for service level distinction. Now create virtual locations for a group of customers (ships tos/sold tos/bill tos) and ‘valuate’ the forecast at that level. Then draw supply lines from all possible supplying sources/locations.
Doesn’t the customer master and order have a ‘default’ delivery plant? Why complicate?
It doesn’t have to be but when you have 25 days at hand to deliver an order, you will change delivery plant a few times. If the order is too big, you certainly will have more than one delivery plant.
So do not design supply network models by being fixated on a ‘default’ supplying plant. Then you can explore options to determine a supplying location considering costs, priorities, rules, quotas, capacities, allocations better.
Corollary –
If you ARE valuing forecast at a fixed source of supply (DC/factory), then you aren’t really doing supply ‘network’ planning. You are simply funneling/forcing demand ONTO some location in your mind. You applied 95% rule. 95% of the time the demand was fulfilled from there!
If you have 2 or more manufacturing locations and 4 or more warehouses, overtime you will ship something from somewhere to somewhere you didn’t originally intend to. Thats how it ends up. So, nothing really is fixed esp. when you have capacities and demand is growing. So, your ‘South’ manufacturing plant will also ship to a warehouse in the North. It was not how it was supposed to be, but it was, and it will be, left to science.
How about forecast ‘consumption’?
Don’t bother. Esp. if the production is entirely forecast driven. If you are a consumer goods/foods/100% make to stock company, leave these esoteric ideas for those fancy consulting firms who love exhibiting scholarship because they have degrees from top schools to justify. How about science? There is some bogus science behind. Not worth 10 bucks but Analysts can spend another million dollars explaining it
