Is your demand planning and forecasting process a black box?
There’s one thing I’m reminded of almost every day at Smart Software that puzzle me: most companies do not understand how forecasts are created, and stocking policies are determined. It’s an organizational black box. Here is an example from a recent sales call:
Spare Parts, Replacement Parts, Rotables, and Aftermarket Parts
Those new to the parts planning game are often confused by the many variations in the names of parts. This blog points out distinctions that do or do not have operational significance for someone managing a fleet of spare parts and how those differences impact inventory planning.
Fifteen questions that reveal how forecasts are computed in your company
In a recent LinkedIn post, I detailed four questions that, when answered, will reveal how forecasts are being used in your business. In this article, we’ve listed questions you can ask that will reveal how forecasts are created.
The top 3 reasons why your spreadsheet won’t work for optimizing reorder points on spare parts
We often encounter Excel-based reorder point planning methods. In this post, we’ve detailed an approach that a customer used prior to proceeding with Smart. We describe how their spreadsheet worked, the statistical approaches it relied on, the steps planners went through each planning cycle, and their stated motivations for using (and really liking) this internally developed spreadsheet.
How to interpret and manipulate forecast results with different forecast methods
This blog explains how each forecasting model works using time plots of historical and forecast data. It outlines how to go about choosing which model to use. The examples below show the same history, in red, forecasted with each method, in dark green, compared to the Smart-chosen winning method, in light green.
Uncover data facts and improve inventory performance
The best inventory planning processes rely on statistical analysis to uncover relevant facts about the data. When you have the facts and add your business knowledge, you can make more informed stocking decisions that will generate significant returns. You’ll also set proper expectations with internal and external stakeholders, ensuring there are fewer unwelcome surprises.
What to do when a statistical forecast doesn’t make sense
Sometimes a statistical forecast just doesn’t make sense. Every forecaster has been there. They may double-check that the data was input correctly or review the model settings but are still left scratching their head over why the forecast looks very unlike the demand history. When the occasional forecast doesn’t make sense, it can erode confidence in the entire statistical forecasting process.
Spare Parts Planning Isn’t as Hard as You Think
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.
The Role of Trust in the Demand Forecasting Process Part 2: What do you Trust
Regardless of how much effort is poured into training forecasters and developing elaborate forecast support systems, decision-makers will either modify or discard the predictions if they do not trust them.”
The Role of Trust in the Demand Forecasting Process Part 1: Who do you Trust
Trust is always a two-way street, but let’s stay on the demand forecaster’s side. What characteristics of and actions by forecasters and demand planners build trust in their work? Key to building trust among the users of forecasts are perceptions of forecaster and demand planner competence and objectivity.
Service-Level-Driven Planning for Service Parts Businesses
Service-Level-Driven Service Parts Planning is a four-step process that extends beyond simplified forecasting and rule-of-thumb safety stocks. It provides service parts planners with data-driven, risk-adjusted decision support.
Implementing Demand Planning and Inventory Optimization Software with the Right Data
Data verification and validation are essential to the success of the implementation of software that performs statistical analysis of data, like Smart IP&O. This article describes the issue and serves as a practical guide to doing the job right, especially for the user of the new application.
7 Digital Transformations for Utilities that will Boost MRO Performance
Utilities in the electrical, natural gas, urban water, and telecommunications fields are all asset-intensive and reliant on physical infrastructure that must be properly maintained, updated, and upgraded over time. Maximizing asset uptime and the reliability of physical infrastructure demands effective inventory management, spare parts forecasting, and supplier management. A utility that executes these processes effectively will outperform its peers, provide better returns for its investors and higher service levels for its customers, while reducing its environmental impact.
Statistical Forecasting: How Automatic method selection works in Smart IP&O
Smart IP&O offers automated statistical forecasting that selects the right forecast method that best forecasts the data. It does this for each time-series in the data set. This blog will help a laymen understand how the forecast methods are chosen automatically
How much time should it take to compute statistical forecasts?
How long should it take for a demand forecast to be computed using statistical methods? This question is often asked by customers and prospects. The answer truly depends. Forecast results for a single item can be computed in the blink of an eye, in as little as a few hundredths of a second, but sometimes they may require as much as five seconds. To understand the differences, it’s important to understand that there is more involved than grinding through the forecast arithmetic itself. Here are six factors that influence the speed of your forecast engine.
Recent Posts
Managing Spare Parts Inventory: Best PracticesIn this blog, we’ll explore several effective strategies for managing spare parts inventory, emphasizing the importance of optimizing stock levels, maintaining service levels, and using smart tools to aid in decision-making. Managing spare parts inventory is a critical component for businesses that depend on equipment uptime and service reliability. Unlike regular inventory items, spare parts often have unpredictable demand patterns, making them more challenging to manage effectively. An efficient spare parts inventory management system helps prevent stockouts that can lead to operational downtime and costly delays while also avoiding overstocking that unnecessarily ties up capital and increases holding costs. […]
5 Ways to Improve Supply Chain Decision SpeedThe promise of a digital supply chain has transformed how businesses operate. At its core, it can make rapid, data-driven decisions while ensuring quality and efficiency throughout operations. However, it's not just about having access to more data. Organizations need the right tools and platforms to turn that data into actionable insights. This is where decision-making becomes critical, especially in a landscape where new digital supply chain solutions and AI-driven platforms can support you in streamlining many processes within the decision matrix. […]
12 Causes of Overstocking and Practical SolutionsManaging inventory effectively is critical for maintaining a healthy balance sheet and ensuring that resources are optimally allocated. Here is an in-depth exploration of the main causes of overstocking, their implications, and possible solutions. […]
FAQ: Mastering Smart IP&O for Better Inventory Management.Effective supply chain and inventory management are essential for achieving operational efficiency and customer satisfaction. This blog provides clear and concise answers to some basic and other common questions from our Smart IP&O customers, offering practical insights to overcome typical challenges and enhance your inventory management practices. Focusing on these key areas, we help you transform complex inventory issues into strategic, manageable actions that reduce costs and improve overall performance with Smart IP&O. […]
7 Key Demand Planning Trends Shaping the FutureDemand planning goes beyond simply forecasting product needs; it's about ensuring your business meets customer demands with precision, efficiency, and cost-effectiveness. Latest demand planning technology addresses key challenges like forecast accuracy, inventory management, and market responsiveness. In this blog, we will introduce critical demand planning trends, including data-driven insights, probabilistic forecasting, consensus planning, predictive analytics, scenario modeling, real-time visibility, and multilevel forecasting. These trends will help you stay ahead of the curve, optimize your supply chain, reduce costs, and enhance customer satisfaction, positioning your business for long-term success. […]
Inventory Optimization for Manufacturers, Distributors, and MRO
- Managing Spare Parts Inventory: Best PracticesIn this blog, we’ll explore several effective strategies for managing spare parts inventory, emphasizing the importance of optimizing stock levels, maintaining service levels, and using smart tools to aid in decision-making. Managing spare parts inventory is a critical component for businesses that depend on equipment uptime and service reliability. Unlike regular inventory items, spare parts often have unpredictable demand patterns, making them more challenging to manage effectively. An efficient spare parts inventory management system helps prevent stockouts that can lead to operational downtime and costly delays while also avoiding overstocking that unnecessarily ties up capital and increases holding costs. […]
Innovating the OEM Aftermarket with AI-Driven Inventory OptimizationThe aftermarket sector provides OEMs with a decisive advantage by offering a steady revenue stream and fostering customer loyalty through the reliable and timely delivery of service parts. However, managing inventory and forecasting demand in the aftermarket is fraught with challenges, including unpredictable demand patterns, vast product ranges, and the necessity for quick turnarounds. Traditional methods often fall short due to the complexity and variability of demand in the aftermarket. The latest technologies can analyze large datasets to predict future demand more accurately and optimize inventory levels, leading to better service and lower costs. […]
Future-Proofing Utilities: Advanced Analytics for Supply Chain OptimizationUtilities in the electrical, natural gas, urban water, and telecommunications fields are all asset-intensive and reliant on physical infrastructure that must be properly maintained, updated, and upgraded over time. Maximizing asset uptime and the reliability of physical infrastructure demands effective inventory management, spare parts forecasting, and supplier management. A utility that executes these processes effectively will outperform its peers, provide better returns for its investors and higher service levels for its customers, while reducing its environmental impact. […]
Centering Act: Spare Parts Timing, Pricing, and ReliabilityIn this article, we'll walk you through the process of crafting a spare parts inventory plan that prioritizes availability metrics such as service levels and fill rates while ensuring cost efficiency. We'll focus on an approach to inventory planning called Service Level-Driven Inventory Optimization. Next, we'll discuss how to determine what parts you should include in your inventory and those that might not be necessary. Lastly, we'll explore ways to enhance your service-level-driven inventory plan consistently. […]