Advantages And Disadvantages Of Using Demand Planning.

Did you know that 79% of companies with high-performing supply chain processes recorded above average yearly revenue growth? Your supply chain performance can be the difference between success and failure.

One of the biggest factors in a high-performing supply chain process is analyzing and planning for your future business needs. One of the most common planning methods used by most businesses is demand planning. In fact, businesses using big data analytics in demand planning experienced a 425% improvement in order-to-cycle delivery times and more than six times improvement in supply chain efficiency of 10 percent or higher.

But first, what exactly is demand planning all about?

What is Demand Planning?

Demand planning is a supply chain management process that analyzes current and projected demand to create a reliable forecast for your business. This method consists of these 10 steps:

• Importing of historical data
• Creating statistical forecasts
• Importing customer forecasts
• Collaborating with customers
• Managing forecasts
• Building consensus forecasts
• Supply and demand collaboration
• Securing constrained forecasts
• Confirmation with customers
• Re-examining data and adjusting planning accordingly

In addition to these 10 steps, there are three key questions your business will need to answer before setting up your demand planning process:

• What products are involved?
• What is the current location of these products?
• What is the current pattern of their demand?

Your business has to conduct this process in an in-depth and detail oriented manner. The more information you possess before you start the execution, the more accurate the outcome will be.

After completing the extensive amount of statistical research, the key stakeholders can use the information to make a rational decision for the company’s future. Using real company data, they can plan future strategies to grow the business further.

This strategic role that demand planning method plays in the organization is viewed by many not only as essential but also the best way to look for accuracy and validity.

Now, after covering the basics of what demand planning is, let us look at the advantages and disadvantages of using this method.

Advantages Of Demand Planning

1. Improves Product Forecast Accuracy

 

Effective demand planning can assist supply chain managers by accurately forecasting product production and expected company’s revenue.

For example, if a company has consistently forecasted too many products for a monthly promotion, demand planning allows for two things:

1. A framework to investigate previous forecasts and identify why the forecasted amounts were predicted in this manner.
2. A methodical approach to adjust forecasts based on actual company data and more.

Why is this important? Having excess or idle inventory is detrimental to your business. Retailers lose more than $1 trillion globally as a result of overstock and out-of-stock situations.  Using demand planning, your business can analyze if your business has been meeting the monthly promotion goals and if it justifies the added costs of holding excess inventory.

Now, let us take a look at how Amazon, one of the world’s biggest eCommerce company, uses demand planning to forecast their product’s demand.

Using a predictive shipping algorithm, Amazon predicts and stocks warehouse products that are regularly purchased by customers. Amazon does this by analyzing the history of their customer’s buying data. For example, for paper towel rolls, Amazon would anticipate the number of paper towels rolls needed in a given week and adjusts warehouse stock accordingly. Using predictive analytics, Amazon is able to optimize business planning and create business efficiency.

With more accurate product forecasting, your business will be better equipped to plan your production needs.

 2. Increases Supply Chain Scheduling

By predicting and analyzing when sales are likely to happen, your business can better plan your production, warehousing, and shipping schedules. When you need to do mandatory maintenance shutdowns or website reboots, you can avoid the time periods when you receive the most orders to execute these activities.

Furthermore, during the months where your business anticipates an increase in demand, you can work with your suppliers and team members to ensure that stock levels remain high. In the event of any anticipated fulfillment delays, you can reach out to your customers early and update them of any upcoming fulfillment issues so that they can better prepare for this delay.

3. Optimize Labor Management

Do you have any idea how many staff members your business requires in the first week of July? If you haven't been using demand planning, the chances are probably not.

If you have too few workers when there is high demand for your products, your business could experience a decrease in fulfillment time along with a decrease in average orders completed per day. When you are unable to fulfill your customers’ orders on time, they will be disappointed. And, as a result, you might lose those customers’ business as they will be more likely to look for other suppliers for their business needs.

Successfully predicting the peaks in demand will allow your business to plan your staffing needs more accurately during periods of high product demands. You can then take action such as hiring more temporary staff members to ensure you produce your goods on time.

4. Create Efficient Cash Flow Management

The inability to pay vendors and suppliers is not a situation any supply chain manager wants to encounter. If you do not pay your vendors on time, they might not be willing to deliver their products to you. This puts your production at risk. You risk angering your customers if your production delays affect your ability to fulfill their orders.

Also, forecasting demand helps your business to predict any shortfalls in sales. With this information, your business can plan to stockpile cash or negotiate for loans or credit terms in advance to meet your financial needs.

Disadvantages Of Demand Planning

Now that we have discussed the benefits of implementing demand planning, let's look at the other side of things. Here are four disadvantages of demand planning.

1. More Complicated Than Helpful

Supply Chain Insights shared, "demand planning is the most misunderstood and most frustrating of any supply chain planning application." This is a viewpoint shared by many. You simply cannot predict the future.

You can plan and forecast different business scenarios, but you cannot be confident that any of these scenarios will happen. Many factors can render a forecast worthless, even when you use good data.

As a result, some companies have shied away from implementing demand planning as it is both time-consuming and tedious. Companies are unwilling to invest time to create a forecast that may not yield any benefits.

2. Numbers are Full of Uncertainty

For any given business, just because June 2017 was a great month for orders, does not guarantee that June 2018 will be just as successful. This idea makes the notion of using demand planning worthless in the minds of some organizations.

It is difficult for a business to base their predictions for the new year based on the previous year as there are many unknown factors. Every promotional campaign, every season and every customer will not behave the same as the year before. In times of political and economic uncertainty, historical data could be completely baseless if used for forecasting. Furthermore, current data is not always readily available.

3. Cognitive Bias

For demand planning to work, data has to be collected from different departments, such as sales or customer success/account managers. Also, the owner of the overall demand planning function must sign off the numbers and is responsible for how low/high they are at the end of the day. While data, sales team input, and customer feedback are all important, since demand planning numbers are all set by people, they are susceptible to cognitive bias.

Cognitive biases include overconfidence, conservatism, recency, bandwagon and other effects, which may over or under-inflate demand planning forecasts.

For example, if the sales team receives incentives for exceeding their sales targets, they might lean towards setting low numbers to improve their bonuses. Or, the CFO in charge of demand planning may be overconfident about new product lines being released.

4. Keep it Simple

Many businesses, especially smaller ones, believe that demand planning is far too complex. They do not have the manpower nor the time to invest in creating a viable demand planning forecast.

A statistical approach may be the right idea for certain campaigns, but to keep each campaign consistent, it is best to keep the planning process as simple as possible.

Here are some other common methods that businesses use:

• Time series methods (Looking at historical data.)
• Regression methods (Examining historical averages to hypothesize future relationships based on common variables.)
• Heuristic methods (Leveraging the experience and expertise of company leaders to execute off their ideas and projections.)
• Consensus approach method (Voting among key players across the organization.)

To Use Or Not To Use This Method?

If you are a part of an organization that keeps very detailed data on each month’s inventory and fulfillment rates, then demand planning could be useful. You can track the months where the supply chain team has excelled in and try to mirror some of the ways they were able to accomplish such success.

If you are not part of an organization that has much historical data, then starting with a simple organizational structure with a clear and simple analytical process will probably be a great start. Trying to implement anything that is more complicated than originally intended is not the wisest decision when first starting out.

While the usefulness of using demand planning is debatable, using an inventory and order management software to help manage your supply chain process only bring benefits to your business. Here at Sweet, we help wholesalers, manufacturers and distributors to streamline their supply chain process.

How To Use Economic Order Quantity To Lower Inventory Costs For Your Business

Retailers lose $1.1 trillion globally in revenue due to overstock and out-of-stock situations. So if you still don't believe ordering the wrong amount of inventory for your business can be extremely costly, you should think again. On one hand, ordering too much inventory results in obsolete inventory and high storage space cost. On the other hand, if you have too little stock, you run the risk of stockouts occurring and letting your customers go elsewhere. What metric can you use to assist you in determining the ideal quantity of goods your business should order?

We’ve got the answer for you: economic order quantity.

What is Economic Order Quantity?

The definition of economic order quantity, or EOQ in short, is the optimum quantity of goods that a company should purchase at a single time to minimize their total inventory cost to the lowest level.

How does using EOQ help your business?

1. Reduce your storage and holding costs

It is a common misconception that accounting for inventory ends after its purchase. Other than the cost of production, you still have to take into account the ordering cost and cost of holding your product inventory in stock. While technology has helped to make inventory management more efficient, “days inventory outstanding” (which is the number of amount of inventory on hand based on average sales a day) has risen at a pace of 8.3% over the past five years. This begs the questions, how do you lower your inventory cost?

The EOQ model considers these factors. Using the EOQ model, you can find the ideal quantity of goods to purchase in one order that is the most economically profitable. If you order too few products at one time, you might find yourself having higher inventory cost due to a higher total ordering cost. The higher ordering cost consists of the cost incurred due to ordering, handling and shipping cost of that particular order. Other times, you might not be saving money when you buy in bulk quantities due to higher storage cost. Only when you order at your EOQ value are you able to achieve the lowest possible inventory cost possible.

2. Satisfy your customer’s need

Ensuring that you have enough products to meet your customer’s demand is often a difficult task. However, by using the EOQ formula, you can determine how much stock to maintain, when do you need to re-order inventory and the number of goods to order. With this information, you can ensure that you will have enough product stock to keep orders fulfilled and your customers satisfied.

Limitations of EOQ

While EOQ is useful for your business, there are some limitations that you will need to take note of when using this value for ordering products to your inventory.

Here are the assumptions for the EOQ model.

1. There is a constant demand for the product.
2. You must have the ability to restock your product immediately. There is no delay for the re-ordering of the stock and the quantity delivered is the exact quantity demanded.
3. Your business is not seasonal and does not fluctuate throughout the year. Note: The standard EOQ model does not factor in seasonality or economic fluctuations. In order to account for seasonal variations in your product, you can use a shorter time period for your EOQ calculations during which the demand is relatively constant for the particular time frame.
4. The formula is used to calculate the optimal amount for individual products and, if applicable, product variants. I.e., not for product categories in aggregate, or for a product with multiple variants.

Economic Order Quantity Formula: How To Calculate It?

To determine your product’s EOQ, you will first have to get the following information: 

• Annual Demand: the expected demand of your product for the year.
• Ordering Cost: This is typically the cost of ordering, shipping, and handling of an order. This is not the cost of goods.
• Holding/Carrying Cost: A product’s holding cost will typically include:

1. Cost of storage space
2. Cost of labor
3. Cost of insurance
4. Cost of goods damaged or spoiled

With these 3 data, you can calculate your products EOQ using the following formula:

Where

Q= Economic order quantity (in units)

D= Annual demand (in units)

S= Ordering cost (per order)

H= Carrying cost/holding cost (per unit)

Allow us to show you an example to illustrate how it works.

Don Sports Store sells Basketballs. The business expects to sell 4500 basketball a year. The unit holding cost per year for the basketball is $0.20. The ordering cost per order is $20 per order.

D (Annual Demand) = 4500

H (Holding Cost) = 0.2

S (Ordering Cost) = 20

Using the EOQ formula,

The economic order quantity calculated for the basketball is 949.

Thus, Don Sports Store should order 949 basketballs per order to minimize its inventory costs.

We hope this article helps you understand how using economic order quantity can lower your inventory costs.

HOW TO LOWER YOUR FREIGHT COSTS ?

If you ship goods, freight costs are a significant part of your company’s expenses. Choosing the best mode of transportation for your company, understanding how cargo is moved through the supply-chain, and improving supply-chain visibility, will all help you to save money.

1. DON’T CATEGORIZE EVERY SHIPMENT AS URGENT.

Whether you’re shipping internationally or nationally, it’s important to do your research and find the best options. It’s important to know which shipping method will be most cost-effective.

Ask yourself: What are current freight market trends? What should you be aware of within the current market?

Make sure your logistics provider is informed on current and upcoming market news, such as a general rate increase (GRI) or upcoming unexpected market changes. For example, at times, freight rates reach their peak season, like prior to Chinese New Year. During this time, all ocean carriers work with full capacity because many importers rush their goods before China closes for a long holiday.

Overall, make sure you are aware of the market – managing your production time before the peak season, and shipping your cargo when freight rates are lower, can save you a lot of money.

2. MAXIMIZE YOUR LOADS.

The more boxes/products you load in an ocean container, the less you pay for each product. Ocean carriers charge per-container from point A to point B. You pay for the container, so you should max out the available space in your container. There is a small ocean freight cost difference between 20″ and 40”/40HQ. Using a 40HQ container instead of a 20” one is a big savings, since you can double the product you are loading with just a small cost difference.

The 4 most-common container sizes used for ocean transportation are 20″, 40″, 40HQ, and 45HQ. Below is the typical estimated CBM you can fit in to a container:

20” – 27 CBM

40” – 57 CBM

40HQ – 67 CBM

45HQ – 78 CBM

3. BUY FOB.

When you buy FOB, you control the freight and freight cost. You will have a better chance of locking in a more competitive rate. If your term is CIF, then it is your supplier’s responsibility to arrange freight to the destination port. If the supplier pays the freight, they will add the cost of transportation on top of the product selling price. Why not take control of the freight since it will be part of your landed cost?

4. CHOOSE THE RIGHT TRANSPORTATION METHOD.

You can use a mix of transportation if necessary. Combinations of air, ocean, and ground transportation can prove to reduce transportation time, while reducing cost. International transportation can be a complex mode of serious shipping, or it can be a simple way of moving cargo from point A to point B. Choosing the most cost-efficient and timely transportation mode is critical. The most common methods of freight transportation are air, ocean, truck + air, and ocean + rail. Discuss these different options with your logistics partner to ensure you are shipping your cargo at the lowest overall cost.

5. CONSOLIDATE YOUR CARGO.

This is important if you are buying small amounts of products from different suppliers and if each supplier doesn’t have enough orders to fill a container. At every origin port, your logistics provider can offer a consolidation service where they can club various suppliers’ products into a full container load. This way you can avoid shipping LCL (see below for why LCL is costly) and can maximize your container load. Sometimes, it is beneficial to ask one of your suppliers to truck the goods to a different location where you have the most cargo shipping, and consolidate with those. While you are paying extra for trucking costs, you might save big on ocean costs by avoiding LCL loads. Your forwarder can always guide you through freight cost calculation.

6. SHIP FCL AND TRY TO AVOID LCL.

In some cases, it might not be possible to avoid shipping LCL. LCL is commonly used if you don’t have enough cargo to fill a container load. Once you ship LCL, you share the container with other importers. As a result, there are more add-on costs as the container needs to go to a container freight station (CFS) to be split. Make sure to discuss this with your logistics partner. Based on how much cargo you have, there is always a breaking point where an LCL or FCL shipment may be less costly for you.

7. WORK WITH A RELIABLE LOGISTICS PARTNER.

Is your logistics partner securing the best pricing with truckers, air freight companies, and steamship lines? Does your logistics partner have multiple ocean carrier contracts? If your logistics partner has more than one carrier option, the chance of your cargo getting on board in the most cost-efficient way will be higher. Your logistics partner can always find an alternate option if they have various carrier contracts.

8. WORK WITH LOGISTICS COMPANIES WHO CAN PROVIDE SUPPLY-CHAIN VISIBILITY.

The goal of supply-chain visibility is to improve lead times and performance. Having visibility at each level of your transportation chain from suppliers to customers will help you to react more quickly to problems. This will save you time and money in the future.

Gaurav kumar..

Emergency Operation - How to bypass Frequency converter connection for a #reefer #Container of #starcool.

Emergency Operation - How to bypass Frequency converter connection for a #reefer #Container of #starcool.

If FC is defective and no replacement part is available, the compressor may be run in the on / off mode.

Defective FC is dismounted and the 3 phases are directly applied to the compressor supply terminals.

Also, a wire-jumper has to be fitted on the remaining 3 terminals, see below figure.

In the service menu, F03 FC TYPE, the parameter NONE is selected. The Unit will then run in the on / off mode with deteriorated temperature controlling performance.

The connection for the FC is shown on below drawings:

Complete step by step pictorial procedure of bypass.

Add caption

13 Things You Need to Know About Freight Forwarding.

13 Things You Need to Know About Freight Forwarding.

Freight forwarding is one of the most widely air freight, ocean freight, roadfreight and, in some cases, railwayfreight.

used methods of international transport for both business and personal use. Freight forwarding companies coordinate the shipment of goods from one destination to another using a range of carriers, including 

The process of freight forwarding might seem daunting, especially if you’re not familiar with the process of freight shipping, but these thirteen facts you need to know about freight forwarding will help you through the process.

1. What is a freight forwarder?

A freight forwarder is responsible for the transportation of goods between one destination and another. Freight forwarding companies specialise in arranging the whole process for their shippers, from the storage to the shipping of their merchandise. They act as an intermediary between the shipper and transportation services, liaising with various carriers to negotiate on price and decide on the most economical, reliable and fastest route.

2. A hassle-free way to import and export goods.

Using a freight forwarder to import and export goods can make the whole process much less stressful. Extremely knowledgeable in the elements of supply chain, freight forwarders can assist on all levels, from the packing and warehouse stages to the customs procedure, taking some of the pressure off you.

3. Freight forwarders provide a range of services.

Freight forwarders can assist with the supply chain process on multiple levels including:

• Customs Clearance
• International export and import documentation
• Insurance
• Packing
• Storage
• Inventory management

4. Advantageous to your business.

Using a freight forwarding company for the transportation of goods to your consumer can be advantageous to your business in many ways. Using their knowledge and expertise, freight forwarders will ensure that your goods will arrive at the correct destination on time and save you money in the process, compared to doing it alone.

5. They are not responsible for shipping delays.

Freight forwarding companies are not responsible for delays in shipping. These delays often occur due to bad weather, breakdown, port delays or unforeseen route changes. Although shipping delays can be frustrating, it is important to remember that it is out of your freight forwarding company’s hands and that they’re trying to resolve it as quickly as possible.
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6. It’s important to maintain a good relationship with your freight forwarder.

Your freight forwarder is in charge of your precious cargo, so it’s important that you establish a good working relationship with them. You want to ensure that you choose a company that you can trust and rely on, as well as one with impeccable customer service to ensure that your cargo shipments arrive safely and on time.

7. You need to make sure your paperwork is up to date.

Before leaving your goods in the hands of your freight forwarder, you need to ensure that all of the paperwork for transporting your goods is completed. Your freight company will be able to help you with this, but it’s an incredibly important step to reduce the risk of your items not being released from customs or the bank refusing to release your funds – neither of which would be beneficial to your business.

8. Shipping restrictions apply to certain products.

Freight forwarding companies adhere to strict regulations and will not carry certain goods and substances, particularly by air or sea freight. Although the list of prohibited items varies from country to country, freight forwarders are generally restricted on:

• Dangerous Goods (including flammable liquid and toxic items)
• Drugs (prescription and recreational)
• Alcohol
• Batteries
• Perishable items (except for those on special express delivery)
• Sharp objects

9. Ask your freight forwarding company about extra services.

Many freight forwarding companies offer extra services for your shipment, so it’s always worth asking them when receiving a quote. These extra services include warehouse storage, cargo insurance, cargo tracking and dangerous goods handling. Even if you don’t require them, it’s always worth bearing these additional services in mind for future reference.

10. There are six key stages of freight forwarding.

The freight forwarding process can be broken up into six key stages, including:

• Export haulage – the transfer of goods from its original source to the freight forwarder’s warehouse.
• Export customs clearance – the goods receive clearance to leave its country of origin.
• Origin handling – the unloading, inspection and validation of the cargo against its booking documents.
• Import customs clearance – the customs paperwork for your cargo will be checked by the authorities.
• Destination handling – the handling of cargo once it reaches the destination office, including transfer to the import warehouse.
• Import haulage – the transfer of cargo from the import warehouse to its final destination.

11. Your freight forwarder should provide you with a range of documents.

With freight forwarding comes a lot of paperwork, especially when shipping overseas. Your freight forwarder should provide you with all of the relevant documents, including:

• Commercial invoice
• Bill of Lading contract
• Certificate of origin statement
• Inspection certificate
• Export license
• Export packing list
• Shippers export declaration document

It’s essential that all of these documents are provided in order to ensure that your goods reach your customer without any issues arising.

12. The strength of a freight forwarders’ network is vital.

Well-established freight forwarders will have an incredibly strong network of contacts and experience in the business. Not only will this help you to get the best price for shipping your cargo, but it will also ensure that your goods arrive in a timely manner. Experienced freight forwarders will have encountered a multitude of problems along the way, so they’ll be able to quickly and efficiently deal with any issues which may arise as your goods are transported.

13. Does your freight forwarder specialise in a particular cargo type?

Some freight forwarders focus on a specific type of cargo, whereas some other companies accept a variety of goods. Finding a freight forwarder who specialises in what you’re looking to ship is beneficial. Not only will they have a team of specialists in place, but they will also have vast experience in dealing with cargo similar to yours.

Doing your research before choosing a logistics company will ensure that your goods get to their final destination in a timely, cost-effective manner.