The Smart Forecaster

Pursuing best practices in demand planning,

forecasting and inventory optimization

Explaining What “Service Level” Means in Your Inventory Optimization Software

Explaining What “Service Level” Means in Your Inventory Optimization Software

Navigating the intricacies of stocking recommendations can often lead to questions about their accuracy and significance. A recent inquiry from one of our customers prompted an insightful discussion on the nuances of service levels and reorder points. During a team meeting, we identified unusual gaps between our Smart-suggested reorder points (ROP) at a 99% service level and the customer’s current ROP. In this post, we unravel the concept of a “99% service level” and its implications for inventory optimization, shedding light on how timing and immediate stock availability play pivotal roles in meeting customer expectations and remaining competitive in diverse industries.

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The Automatic Forecasting Feature

The Automatic Forecasting Feature

Automatic forecasting is the most popular and most used feature of SmartForecasts and Smart Demand Planner. Creating Automatic forecasts is easy. But, the simplicity of Automatic Forecasting masks a powerful interaction of a number of highly effective methods of forecasting. In this blog, we discuss some of the theory behind this core feature. We focus on Automatic forecasting, in part because of its popularity and in part because many other forecasting methods produce similar outputs. Knowledge of Automatic forecasting immediately carries over to Simple Moving Average, Linear Moving Average, Single Exponential Smoothing, Double Exponential Smoothing, Winters’ Exponential Smoothing, and Promo forecasting.

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5 Steps to Improve the Financial Impact of Spare Parts Planning

5 Steps to Improve the Financial Impact of Spare Parts Planning

In today’s competitive business landscape, companies are constantly seeking ways to improve their operational efficiency and drive increased revenue. Optimizing service parts management is an often-overlooked aspect that can have a significant financial impact. Companies can improve overall efficiency and generate significant financial returns by effectively managing spare parts inventory. This article will explore the economic implications of optimized service parts management and how investing in Inventory Optimization and Demand Planning Software can provide a competitive advantage.

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Don’t blame shortages on problematic lead times.

Don’t blame shortages on problematic lead times.

Lead time delays and supply variability are supply chain facts of life, yet inventory-carrying organizations are often caught by surprise when a supplier is late. An effective inventory planning process embraces this fact of life and develops policies that effectively account for this uncertainty. Sure, there will be times when lead time delays come out of nowhere and cause a shortage. But most often, the shortages result from:

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A Gentle Introduction to Two Advanced Techniques: Statistical Bootstrapping and Monte Carlo Simulation

A Gentle Introduction to Two Advanced Techniques: Statistical Bootstrapping and Monte Carlo Simulation

Smart Software’s advanced supply chain analytics exploits multiple advanced methods. Two of the most important are “statistical bootstrapping” and “Monte Carlo simulation”. Since both involve lots of random numbers flying around, folks sometimes get confused about which is which and what they are good for. Hence, this note. Bottom line up front: Statistical bootstrapping generates demand scenarios for forecasting. Monte Carlo simulation uses the scenarios for inventory optimization.

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How does your ERP system treat safety stock?

How does your ERP system treat safety stock?

Is safety stock regarded as emergency spares or as a day-to-day buffer against spikes in demand? Knowing the difference and configuring your ERP properly will greatly benefit your bottom line. It is critical to understand how your ERP configurations will impact treatment of safety stock and replenishment orders/production job suggestions. Doing so ensures that unintended mistakes that cause inventory bloat and shortages can be avoided.

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Bottom Line Strategies for Spare Parts Planning

Bottom Line Strategies for Spare Parts Planning

Managing spare parts presents numerous challenges, such as unexpected breakdowns, changing schedules, and inconsistent demand patterns. Traditional forecasting methods and manual approaches are ineffective in dealing with these complexities. To overcome these challenges, this blog outlines key strategies that prioritize service levels, utilize probabilistic methods to calculate reorder points, regularly adjust stocking policies, and implement a dedicated planning process to avoid excessive inventory. Explore these strategies to optimize spare parts inventory and improve operational efficiency.

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Top 4 Moves When You Suspect Software is Inflating Inventory

Top 4 Moves When You Suspect Software is Inflating Inventory

Discover the key strategies to tackle inventory inflation caused by software in your supply chain. We often are asked, “Why is the software driving up the inventory?” The answer is that Software isn’t driving it in either direction – the inputs are driving it, and those inputs are controlled by the users (or admins). Here are four things you can do to get results you expect.

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6 Observations About Successful Demand Forecasting Processes

6 Observations About Successful Demand Forecasting Processes

Forecasting is both an art and a science, requiring a balance between professional judgment and objective statistical analysis. In this blog, we will explore how to generate accurate predictions by leveraging statistical methods, incorporating business knowledge, and enhancing credibility through refinement and graphical representation. Learn about aligning techniques with data nature and integrating them with other business processes, creating a comprehensive planning approach that acknowledges margin of error and forecast bias. Gain the principles and techniques for successful demand forecasting, empowering informed decision-making and optimized planning.

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Don’t Blame Excess Stock on “Bad” Sales / Customer Forecasts

Don’t Blame Excess Stock on “Bad” Sales / Customer Forecasts

Sales forecasts are often inaccurate simply because the sales team is forced to give a number even though they don’t really know what their customer demand is going to be. Let the sales teams sell. Don’t bother playing the game of feigning acceptance of these forecasts when both sides (sales and supply chain) know it is often nothing more than a WAG.

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What makes a probabilistic forecast?

What makes a probabilistic forecast?

What’s all the hoopla around the term “probabilistic forecasting?” Is it just a more recent marketing term some software vendors and consultants have coined to feign innovation? Is there any real tangible difference compared to predecessor “best fit” techniques? Aren’t all forecasts probabilistic anyway?

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A Practical Guide to Growing a Professional Forecasting Process

A Practical Guide to Growing a Professional Forecasting Process

Many companies looking to improve their forecasting process don’t know where to start. It can be confusing to contend with learning new statistical methods, making sure data is properly structured and updated, agreeing on who “owns” the forecast, defining what ownership means, and measuring accuracy. Having seen this over forty-plus years of practice, we wrote this blog to outline the core focus and to encourage you to keep it simple early on.

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Prepare your spare parts planning for unexpected shocks

Prepare your spare parts planning for unexpected shocks

In today’s unpredictable business climate, we do have to worry about supply chain disruptions, long lead times, rising interest rates, and volatile demand. With all these challenges, it’s never been more vital for organizations to accurately forecast parts usage, stocking levels, and to optimize replenishment policies such as reorder points, safety stocks, and order quantities. In this blog, we’ll explore how companies can leverage innovative solutions like inventory optimization and parts forecasting software that utilize machine learning algorithms, probabilistic forecasting, and analytics to stay ahead of the curve and protect their supply chains from unexpected shocks.

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Why Spare Parts Tradeoff Curves are Mission-Critical for Parts Planning

Why Spare Parts Tradeoff Curves are Mission-Critical for Parts Planning

When managing service parts, you don’t know what will break and when because part failures are random and sudden. As a result, demand patterns are most often extremely intermittent and lack significant trend or seasonal structure. The number of part-by-location combinations is often in the hundreds of thousands, so it’s not feasible to manually review demand for individual parts. Nevertheless, it is much more straightforward to implement a planning and forecasting system to support spare parts planning than you might think.

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Recent Posts

  • Finding Your Spot on the Inventory Tradeoff CurveFinding Your Spot on the Inventory Tradeoff Curve
    This video blog holds essential insights for those working with the complexities of inventory management. The session focuses on striking the right balance within the inventory tradeoff curve, inviting viewers to understand the deep-seated importance of this equilibrium. […]
  • Why MRO Businesses Need Add-on Service Parts Planning & Inventory SoftwareWhy MRO Businesses Need Add-on Service Parts Planning & Inventory Software
    MRO organizations exist in a wide range of industries, including public transit, electrical utilities, wastewater, hydro power, aviation, and mining. To get their work done, MRO professionals use Enterprise Asset Management (EAM) and Enterprise Resource Planning (ERP) systems. These systems are designed to do a lot of jobs. Given their features, cost, and extensive implementation requirements, there is an assumption that EAM and ERP systems can do it all. In this post, we summarize the need for add-on software that addresses specialized analytics for inventory optimization, forecasting, and service parts planning. […]
  • Descriptive, Predictive, and Prescriptive AnalyticsThe Three Types of Supply Chain Analytics
    In this video blog, we explore the critical roles of Descriptive, Predictive, and Prescriptive Analytics in inventory management, highlighting their essential contributions to driving supply chain optimization through strategic foresight and insightful data analysis. […]
  • Warning Signs that You Have a Supply Chain Analytics GapWarning Signs that You Have a Supply Chain Analytics Gap
    “Business is war” may be an overdone metaphor but it’s not without validity. Like the “Bomber Gap” and the “Missile Gap,” worries about falling behind the competition, and the resulting threat of annihilation, always lurk in the minds of business executives, If they don’t, they should, because not all gaps are imaginary (the Bomber Gap and the Missile Gap were shown to not exist between the US and the USSR, but the 1980’s gap between Japanese and American productivity was all too real). The difference between paranoia and justified concern is converting fear into facts. This post is about organizing your attention toward possible gaps in your company’s supply chain analytics. […]
  • The Objectives in ForecastingThe Objectives in Forecasting
    A forecast is a prediction about the value of a time series variable at some time in the future. For instance, one might want to estimate next month’s sales or demand for a product item. A time series is a sequence of numbers recorded at equally spaced time intervals; for example, unit sales recorded every month. The objectives you pursue when you forecast depend on the nature of your job and your business. Every forecast is uncertain; in fact, there is a range of possible values for any variable you forecast. Values near the middle of this range have a higher likelihood of actually occurring, while values at the extremes of the range are less likely to occur. […]

    Inventory Optimization for Manufacturers, Distributors, and MRO

    • Why MRO Businesses Need Add-on Service Parts Planning & Inventory SoftwareWhy MRO Businesses Need Add-on Service Parts Planning & Inventory Software
      MRO organizations exist in a wide range of industries, including public transit, electrical utilities, wastewater, hydro power, aviation, and mining. To get their work done, MRO professionals use Enterprise Asset Management (EAM) and Enterprise Resource Planning (ERP) systems. These systems are designed to do a lot of jobs. Given their features, cost, and extensive implementation requirements, there is an assumption that EAM and ERP systems can do it all. In this post, we summarize the need for add-on software that addresses specialized analytics for inventory optimization, forecasting, and service parts planning. […]
    • Spare-parts-demand-forecasting-a-different-perspective-for-planning-service-partsThe Forecast Matters, but Maybe Not the Way You Think
      True or false: The forecast doesn't matter to spare parts inventory management. At first glance, this statement seems obviously false. After all, forecasts are crucial for planning stock levels, right? It depends on what you mean by a “forecast”. If you mean an old-school single-number forecast (“demand for item CX218b will be 3 units next week and 6 units the week after”), then no. If you broaden the meaning of forecast to include a probability distribution taking account of uncertainties in both demand and supply, then yes. […]
    • Whyt MRO Businesses Should Care about Excess InventoryWhy MRO Businesses Should Care About Excess Inventory
      Do MRO companies genuinely prioritize reducing excess spare parts inventory? From an organizational standpoint, our experience suggests not necessarily. Boardroom discussions typically revolve around expanding fleets, acquiring new customers, meeting service level agreements (SLAs), modernizing infrastructure, and maximizing uptime. In industries where assets supported by spare parts cost hundreds of millions or generate significant revenue (e.g., mining or oil & gas), the value of the inventory just doesn’t raise any eyebrows, and organizations tend to overlook massive amounts of excessive inventory. […]
    • Top Differences between Inventory Planning for Finished Goods and for MRO and Spare PartsTop Differences Between Inventory Planning for Finished Goods and for MRO and Spare Parts
      In today’s competitive business landscape, companies are constantly seeking ways to improve their operational efficiency and drive increased revenue. Optimizing service parts management is an often-overlooked aspect that can have a significant financial impact. Companies can improve overall efficiency and generate significant financial returns by effectively managing spare parts inventory. This article will explore the economic implications of optimized service parts management and how investing in Inventory Optimization and Demand Planning Software can provide a competitive advantage. […]