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Steps
Specifying the objective Determining the time perspective Making choice of method Collection of data Estimation and interpretation of results
Expert Opinion
The expert opinion method, also known as EXPERT CONSENSUS METHOD, is being widely used for demand forecasting. This method utilizes the findings of market research and the opinions of management executives, consultants, and trade association officials, trade journal editors and sector analysts. When done by An expert, qualitative techniques provide reasonably good forecasts for a short term because of the experts familiarity with the issues and the problems involved. DELPH I METHOD:- The Delphi method is primarily used to forecast the demand for NEW PRODUCTS.
SURVEY
A firm can determine the demand for its products through a market survey. It may launch a new products, if the survey indicates that there is a demand for that particular product in the market. For example, Coke in India expanded its product range beyond carbonated drinks, after the company conducted a nationwide survey. The survey revealed that about 80% of the youth preferred to drink tea or coffee rather than carbonated drinks at regular intervals. The remaining 20% preferred to have milk products while only 2% preferred to drink carbonated drinks like coffee. The company is now trying to bring tea and coffee brands to India by installing vending machines. It is also planning to introduce a coconut flavored drink in kerala and a black currant in Tamilnadu named portello.
Market Experiment Market Experiment can help to overcome the survey problems as they generate data before introducing a product or implementing a policy.
Test marketing
In this case, a test area is selected, which should be a representative of the whole market in which the new product is to be launched. A test area may include several cities and towns, or a particular region of a country or even a sample of consumers. More than one test area can be selected if the firm wants to assess the effects on demand due to various alternative marketing mix.
Advertising or packaging can be done in various market areas. Then the demand for the product can be compared at different levels of price and advertising expenditure. In this way, consumers response to change in price or advertising can be judged.
2)
3)
Controlled experiments
Controlled experiments are conducted to the test demand for a new product launched or to test the demands for various brands of a product. They are selected some consumers.
1) The consumers may be biased in the process of selection of a sample of consumers on which experiments is to be performed. 2)The selected consumers may not respond accurately If they come to know that they are a part of an experiment being conducted and their behavior is being recorded.
1)TREND:- Past data is used to predict the future sales of firm trend is a long term increase or decrease in the variable. 2)SEASONAL VARIATIONS:- It is taken into account the Variations in demand during different seasons. Eg:- The sale of cotton dresses increases in summer. The sale of Woolen clothes increases in winter. 3)CYCLICAL VARIATIONS:- This variations in demand due to the fluctuations in the business cycle Boom, recession and depression. 4) RANDOM FLUCTUATIONS:- It may happen due to Natural calamities like flood, earthquake, etc. Which cannot be predicted accurately.
BAROMETRIC ANALYSIS
DEFINITION:- The prediction of turning points In one economic time series through the use of Observations on another time series called the Barometer of the Indicator. It can be divided into three groups 1)Leading indicators. 2)Coincident indicators. 3)Lagging indicators.
LEADING INDICATORS
It compares the existing data available. In this Index includes such as things as average weekly hours worked and claims for Unemployment insurance, manufacturers new orders, stock prices, orders for plant and equipment, index of consumer expectations, and real M2 money supply.
LAGGING INDICATORS
The lagging indicator composite includes changes in labour costs per unit, ratio of inventory to sales, and figures on installment credit and loans, among other items, In Practical attempts to forecast the future, these indices are among the most important tools available to most organizations, including the government. These indicators provide signals of changes in economic activities like national income or national product, the level of employment and the rate of inflation.
Conclusion
Accurate demand forecasting requires
Product knowledge Knowledge about the customer Knowledge about the environment
Procurement Management
Closing Control
Integration Scope Time Cost Quality HR Communications Risk Procurement Procurement Integration Procurement
Procurement Management
Acquisition of goods and services, including: Plan Acquisitions Define what to procure Plan Contracting Prepare a solicitation Request Proposals Solicit responses Select a Vendor Evaluate and choose a vendor, and negotiate a contract Administer the Contract Manage the vendor relationship, document ongoing contract activities and request changes Closing the Contract Accept the final products of the contract
Integration
Planning Process Group Continue project integration management by including a procurement management plan in the project management plan
Closing Process Group Acceptance of contract deliverables and project phases and formally completing the project
Plan Acquisitions
Acquisition options: Upgrade Modify the existing system Build Develop system from the ground up internally or through a third party Buy Purchase a Commercial-Off-The-Shelf (COTS) solution hosted internally or by a third party Transfer Obtain public domain or no/low-cost license software from a third party Re-Platform Convert the status quo to a new technology platform using internal or third party resources
Prepare Requirements
Focus on strategic objectives
View IT as a tool enabling successful clinical improvements tied to an organizations objectives, e.g., measure a successful EMR implementation by how it achieves increased patient safety Define user requirements tied to strategic objectives Avoid re-inventing the wheel by using existing examples of requirements instead of starting from scratch
Plan Contracting
Reduce the time to procure a system by limiting initial vendor proposals to scripted demonstration of user requirements
Request vendor costs and support for technical requirements from only those vendors that support user requirements Maintain consensus by working with key users as they prepare requirements, conduct vendor demonstrations and select the best option
Request Proposals
Identify vendors that support user needs, e.g., EMR niche, provide similar products to competitors and/or have existing relationships with your organization Prepare a vendor short-list and solicit proposals
Select Vendor
Evaluate vendors during demonstrations Request finalists costs and support for technical requirements Check references and conduct site visits Select vendor supporting most user requirements at lowest cost
Negotiate Contract
Use an agreement provided by your organization not the vendor
Include a contract scope of services based on the project SOW, which defines the criteria for approval of and payment for deliverables
Assemble your negotiating team, including project manager and an attorney with system procurement experience Identify, prioritize and share negotiation issues with vendor Obtain and evaluate vendor response Prepare fallback response and share with vendor Narrow issues to short-list and conduct face-to-face negotiations
Administer Agreement
Use contract scope of services , project schedule and budget as standards Monitor vendor compliance Identify deviations and define agreed upon corrective actions Prepare change orders/contract amendments where required by corrective actions Monitor and document corrective actions successful completion of
Close Agreement
Compare deliverable results to deliverable acceptance criteria included in contract scope of services Identify corrective actions if the vendor does not adhere to the acceptance criteria Review updated deliverable to confirm compliance Accept and pay vendor for deliverable when it complies with acceptance criteria
Inventory Management
What is inventory?
Inventory is the raw materials, component parts, work-in-process, or finished products that are held at a location in the supply chain.
Why do we care?
At the macro level:
Why do we care?
At the firm level:
Sales growth: right inventory at the right place at the right time Cost reduction: less money tied up in inventory, inventory management, obsolescence
Higher profit
Why do we care?
Each of Solectrons big customers, which include Cisco, Ericsson, and Lucent was expecting explosive growth for wireless phones and networking gear.when the bottom finally fell out, it was too late for Solectron to halt orders from all of its 4,000 suppliers. Now, Solectron has $4.7 billion in inventory. (BW, March 19, 2001) When Palm formally reported its quarterly numbers in June, the damage was gruesome. Its loss totaled $392 million, a big chunk of which was attributable to writing down excess inventory - piles of unsold devices. (The Industry Standard, June 16, 2001) Liz Claiborne said its unexpected earnings decline is the consequence of higher than anticipated excess inventories. (WSJ, August 1993)
How do you manage your inventory? How much do you buy? When?
Soda Milk Toilet paper Gas Cereal Cash
Costs of Inventory
Physical holding costs:
out of pocket expenses for storing inventory (insurance, security, warehouse rental, cooling) All costs that may be entailed before you sell it (obsolescence, spoilage, rework...)
Opportunity cost of inventory: foregone return on the funds invested. Operational costs:
Delay in detection of quality problems. Delay the introduction of new products. Increase throughput times.
Benefits of Inventory
Hedge against uncertain demand Hedge against uncertain supply
Home Depot
Our inventory consists of up to 35,000 different kinds of building materials, home improvement supplies, and lawn and garden products. We currently offer thousands of products in our online store. We offer approximately 250,000 more products through our special order services.
Multiperiod model
orders On-hand inventory
Supply
Key questions:
How often to review? When to place an order? How much to order? How much stock to keep?
Supplier
Retailer
Demand
Demand is known and deterministic: D units/year We have a known ordering cost, S, and immediate replenishment Annual holding cost of average inventory is H per unit Purchasing cost C per unit
Purchasing Cost = (total units) x (cost per unit) Ordering Cost = (number of orders) x (cost per order) Inventory Cost = (average inventory) x (holding cost)
D
Q
Time
Purchasing cost = D x C
Ordering cost =
D Q Q 2
x S
Inventory cost =
x H
In order now to find the optimal quantity we need to optimize the total cost with respect to the decision variable (the variable we control)
Total cost
Cost
Holding costs
Example: Assume a car dealer that faces demand for 5,000 cars per year, and that it costs $15,000 to have the cars shipped to the dealership. Holding cost is estimated at $500 per car per year. How many times should the dealer order, and what should be the order size?
Q
*
If delivery is not instantaneous, but there is a lead time L: When to order? How much to order?
Order Quantity Q Inventory
Time
If demand is known exactly, place an order when inventory equals demand during lead time.
Order Quantity Q Inventory
Q: When shall we order? A: When inventory = ROP Q: How much shall we order? A: Q = EOQ
Reorder Point (ROP) ROP = LxD Lead Time D: demand per period L: Lead time in periods Place order Receive order
Time
Example (continued)
What if the lead time to receive cars is 10 days? (when should you place your order?) Since D is given in years, first convert: 10 days = 10/365yrs
R =
10 D = 365
So, when the number of cars on the lot reaches 137, order 548 more cars.
ROP = ???
Demand???
Place order Receive order
Time
Lead Time
ROP
Inventory at time of receipt Lead Time Place order Receive order Time
Unfilled demand
If ROP = expected demand, service level is 50%. Inventory left 50% of the time, stock outs 50% of the time.
Inventory Level Order Quantity
Uncertain Demand
Average
Time
Time
Decide what Service Level you want to provide (Service level = probability of NOT stocking out)
Service level
Probability of stock-out
Safety Stock
Service level
Probability of stock-out
Safety Stock Read z from Normal table for a given service level
Caution: Std deviation in LT demand Variance over multiple periods = the sum of the variances of each period (assuming independence) Standard deviation over multiple periods is the square root of the sum of the variances,
2 SD H
Find the safety factor from a z-table or from the graph. Find std deviation in LT demand: square root law.
std dev in LT demand ( std dev in daily demand ) LT D LT days in LT
Example (continued)
Back to the car lot recall that the lead time is 10 days and the expected yearly demand is 5000. You estimate the standard deviation of daily demand demand to be d = 6. When should you re-order if you want to be 95% sure you dont run out of cars?
Since the expected yearly demand is 5000, the expected demand over the lead time is 5000(10/365) = 137. The zvalue corresponding to a service level of 0.95 is 1.65. So
WAREHOUSING MANAGEMENT
Gaurav Narkhede | Josue Servalis | Praneetha Boda Mike Macas |
Part of firms logistics system that stores products at and between point of origin and point of consumption. Term Warehousing is referred as transportation at zero miles per hour Warehousing provides time and place utility for raw materials, industrial goods, and finished products, allowing firms to use customer service as a dynamic value-adding competitive tool.
TYPE OF WAREHOUSING
Public Warehousing Private Warehousing Contract Warehousing Multi-client Warehousing
DESIGN CONSIDERATION
RECEIVING
INP UT
WAREHOUSE PROCESS
Put-away
Identify Product Identify Product Location Move Products Update Records
Storage
Shipping Preparation
Packing Labeling Stacking
Order Picking
Information Walk & Pick Batch Picking
OUT PUT
Keep track of items so they can be found readily & correctly. Minimize the total physical effort & thus the cost of moving goods into & out of storage. Provide communication links with customers
Benefits of Warehouse Management Provide a place to store & protect inventory Reduce transportation costs Improve customer service levels Complexity of warehouse operation depends on the number of SKUs handled & the number of orders received & filled. Most activity in a warehouse is material handling.
WAREHOUSE ACTIVITIES
Receive goods Identify the goods Dispatch goods to storage Hold goods Pick goods Marshal shipment Dispatch shipment
Receive goods
Accepts goods from Outside transportation or attached factory &
accepts responsibility
Check the goods against an order & the bill of loading Check the quantities Check for damage & fill out damage reports if necessary Inspect goods if required
Hold goods
goods are kept in storage & under proper protection until needed
Pick goods
items required from stock must be selected from storage & brought to a marshalling area
Maximize productivity & minimize cost, warehouse management must work with the following
Maximize use of space
stored
Accessibility means being able to get at the goods wanted with a minimum amount of work
Stock Location
Objectives To provide the required customer service
Stock Location
Fixed Location SKU assigned a permanent location, & no other items are stored there Fixed-location systems usually have poor cube utilization Usually used in small warehouses; throughput is small, & there are few SKUs
continued
Stock Location
continued
Stock Location
continued
Stock Location
continued
Advantages of Central Storage Ease of control Inventory record accuracy is easier to maintain Specialized storage can be used Reduced safety stock, since users do not need to carry their own safety stock
Zone system
Warehouse is divided into zones, & each
Simple, well-documented transaction system Identify the item Verify the quantity Record the transaction Physically execute the transaction
Limited access Inventory must be kept in a safe, secure (locked) place with limited general access Well-trained workforce
Logistic Management
LOGISTICS Defined Planning implementing and controlling the physical flow of material and finished goods from point of origin to point of use to meet customer`s need at a profit By Philip Kotler It is essentially a planning process and an information activity So A integrative process that optimizes the flow of material and supplies through the organization and its operations to the customer
The word logistic has originated from Greek word Logistikos and the Latin word Logisticus which means science of computing & calculating In ancient times it was used more in connection with moving armies, the supplies of food & armaments to the war front. During World War II logistics gained importance in army operations covering the movement of supplies , men & equipment across the border Today It has acquired the wider meaning and is used in the business for the movement of material from suppliers to the manufacturer and finally the finished goods to the consumers
Scope of Logistic It is of critical importance to the organization how it delivers products & services to the customer , whether the product is tangible or intangible. Effective & efficient Physical movement of the tangible product will speak of intangible services associated with the product and the organization which is delivering it. In Case of intangible product , the delivery of tangibles at the right place & right time will speak about its quality. On the macro level infrastructure such as Various modes of transport , transportation equip., storage facilities, connectivity & information processing are contributing to a larg3e extent in the physical movement of goods produced in manufacturing , mining & agriculture Sectors.
Scope of logistics
This speed & reliability in distribution of products & services contribute to a great extent in the growth of a country`s domestic & international trade . Logistic cost as a percentage of GDP across the world is shown in the following table Country Logistic cost as a percentage of GDP
Korea China Japan India France UK USA 16 15 14 13 12 11 10
Scope of logistics
India spent nearly $ 50 billion to move material from one use to another.
So the Public distribution system in the country needs logistical support for delivering goods at right place on time and the lowest cost. At Micro Level logistic plays a critical role in the value delivery system of business organization to provide superior customer service i.e. to achieve a desired level of delivered services and quality at the lowest possible cost. In a nutshell any productivity improvement that could be achieved in any part of logistic system,at the micro or macro level would help in cost reduction and proper deployment of scare national resources to the productive purposes.
Fact
In a manufacturing org. the business process starts with the flow of material from the suppliers, progress to the plant, then to the customer through the distribution channel the department may excel in their respective function but org. as a whole their performance may be dismal. Reason Lack of Co ordination in their activities They have different goal to cherish There is no single agency that coordinates their functions and homogenizes them. How to overcome ? Use of Logistic as a system
Order Processing Involve following activities Order checking for any deviation in agreed on negotiated term Technical details;price;delivery period;payment terms;taxes etc Checking the availability of material in stock (material requisition) Production & material scheduling for shortage Acknowledging the order, indicating deviation if any It is routine operation but require great deal of planning training of people involved and investment to bring about efficiency & accuracy In a large organization a system capable of handling thousands of voluminous orders with minimum human involvement or without human involvement is a must involving shortened order fulfillment cycle to have edge over rivals
Information Flow It is basically information based activity of inventory movement across the supply chain. Hence role of information system plays a vital role in delivering superior customer service This function is required to facilitate the following information needs Order Registration Order checking & editing Order processing Coordination means to integrate the total supply chain of the company with informational needs as to time ,quantity, value e.g Lead time, rate of consumption , delivery schedule & price of the material , Transportation time & cost etc.
Warehousing
A storage place wherein finished goods are stored till they are sold.Effectiveness of an organization`s marketing strategy depends on making the right decision regarding warehouse.
Nowadays Warehouse are treated as switching facilities rather than storage place.It is a major cost center, many customer problem are the direct result of improper warehousing management. Major decision of ware house are as follows: Location ,Size & Number of warehousing facilities Warehouse layout Design of building Ownership of the warehouse
Inventory management
Point order problem That is How much to order When to order For this we require Dependable IMS Independent IMS Purchase Control Stores control
ABC Analysis VED Analysis
EOQ & EBQ Analysis
Issue management
Level Management MRP System
JIT System
Packaging It is also a critical element in physical distribution of the product , which influences the efficiency of the logistic system this is done with the view of following : Foe handling and damage prevention For communications For inter modal transportation Storage space economy Thus to reduce packaging cost
Transportation
Foe the movement of goods from supplier to buyer , transportation is the most fundamental and important component of logistic. E.g. for low unit value products the transportation cost component is 20% of the product cost. In logistic cost its share varies up to 65-70% in case of mass consumed very low unit price products. Mode of transportation ( Cost & time factor) Own fleet or Outsourcing Route Planning Vehicle scheduling Are the few decision which are involved in transportation
Three Forces
Which have change the perspective of logistics
Globalization
Focus on Supply chain Management Outsourcing of Non Core Competency Functional Area
Globalization
The entire world has become a global village for marketers because of the liberalization of economics of most countries and the emergence of WTO which is forcing business organizations to supply products beyond the national boundaries wherever there is a market opportunity. In such conditions the role of
LOGISTICS
Will be to provide time and place time and place utility of the product to the customer
Value Chain
It is understood now that an organization`s competitive Success could only come through either cost leadership or offering differentiated product and services
LOGISTIC MANAGEMENT
Can provide both the benefits simultaneously Through its value chain activities Which can be categorized into different types Inbound logistics operations Out bound logistics Support activates e.g HR, Accounts & finace, IT & MIS
Infrastructure
Services
Customer Value
M&M
HR
Supply Chain
Stores
Operations
Stores
Procurement
Warehouse
Vendor
Customer
Inbound Logistics
Supply Chain
Material flow
Material flow
Stores RM
Purchase
Vendor
P r o c u r e m e n t
OPERATIONS
Information flow
Inbound Logistics
Logistic
HR
A/Cs FinanceUtilities Marketing PPC
QC
Mat. Mng.
IT
Others
Organizational Functions
In process Log.
Suppliers
Procurement
In Bound Log.
Processing
Distribution
Out Bound Logistic
Customer
Warehousing
Information
Inventory Mang.
LOGISTIC FUNCTION
Order Processing
Inventory Reduction Reliable and consistent delivery performance Freight economy Minimum product damage quick Response
NOTE:
Amongst most of the Indian companies logistics outsourcing Has now become an accepted trend for the following reasons: Cost Saving Focus on core Business Paucity of funds Reduction in liabilities Wider Geographical coverage Cross pollination of better available practice
Warehousing Nowadays warehousing is used as a switching facility rather than as a long term storage house. Attention is paid to
1
Higher lower shorter inventory turnover operating cost cycle time And in light of these warehouse`s performance is judged by its productivity and cost performance while trying to achieve 2 polemic goals.
1 2
Customer`s satisfaction
Objective Main better customer service low operating cost Ancillary objective
Maximum utilization of storage space Higher labour productivity Maximum Asset utilization Reduction in material handling Increase in inventory turnover Reduce order filing time
Material Storage function Due to non synchronization of Manufacturing cycle with that of the consumption cycle of the material , storage of the material remains a big hurdle So material storage is required to accommodate the following functions: Holding Consolidation Postponement Break Bulk packing Cross Docking Mixing
3. Order filing
Information handling function For this following information is required Goods inward Inspection & auditing Goods outward Excess Stock Invoicing Warehouse expenses Transit damage & Breakage Consignment tracking This all information facilitate quick decision