The Smart Forecaster

Pursuing best practices in demand planning,

forecasting and inventory optimization

Contributed to The Smart Forecaster by Dr. Greg Parlier (Colonel, U.S. Army, retired). Details on Dr. Parlier’s background conclude the post.

For over two decades, the General Accounting Office (GAO) has indicated that the Defense Department’s logistics management has been ineffective and wasteful, and that the Services lack strategic plans to improve overall inventory management and supply chain performance.

For the US Army, this problem is directly related to a persistent inability to link inventory investment levels and policies with supply chain effectiveness to achieve combat equipment readiness objectives required for globally deployed forces. This shortcoming has been attributed to numerous complexities associated with managing geographically dispersed, independently operating organizations, further compounded by a lack of visibility, authority and accountability across this vast global enterprise.

Unlike the corporate world, where powerful forces encourage innovation to drive competitiveness and efficiency, the Army is not a revenue generating organization focused on “quarterly earnings” and profitability. Certainly, the Army wants to be an efficient consumer of resources—but unlike the private sector’s focus on profit as a bottom line, the surrogate motivator for the Army is ‘force readiness’. This includes equipment availability and weapon system readiness for current operations in Afghanistan, as well as future capability requirements directed by the National Command Authority.

To sustain that equipment availability, the Army must synchronize disparate organizational components using myriad processes with disconnected legacy management information systems across numerous supply support activities which frequently relocate to support deploying forces.

Today, while still engaged in Afghanistan, the Army is also committed to a comprehensive and ongoing transformation. Central to this effort is recognition that dramatic improvements must be achieved in logistics operations and supply chain management. Owning one of the world’s largest and most complex supply chains, the Army is now investing in historically unprecedented efforts to fully capitalize on the promises offered by new information-based technologies. For example, the “Single Army Logistics Enterprise” is believed to be the most ambitious and expensive Enterprise Resource Planning (ERP) implementation project ever undertaken.

These ERP implementation projects have met with very mixed results. While the evidence suggests that dramatic performance improvements for competitive advantage can be achieved in the commercial sector, this has occurred only where so called “IT solutions” are applied to an underlying foundation of mature, efficient and appropriate business processes.

The reality of most cases in recent years, however, has not been this success. Rather, attempts have been made to “bolt on” a solution (like an ERP system, for example) to existing business processes, in misguided efforts to replicate legacy management practices. Such efforts to automate existing processes have, all too often, simply created chaos. In fact, these attempts have not only failed to achieve anticipated improvements, but have actually resulted in reduced performance.

The general pattern has been: the greater the IT investment and organizational scope, the more likely “failure” occurs, in the form of cost overruns, missed schedules, and even project failure—where the effort has finally been abandoned.

We believe the way to enable a coordinated, comprehensive approach for logistics transformation is by creating an “engine for innovation” to accelerate and sustain continuous performance improvement for Army logistics and supply chain management. We are developing a ‘Center for Innovation in Logistics Systems’ to systematically evaluate major organizational components, conduct root cause analyses, diagnose structural disorders and prescribe integrated solutions. We have now identified several ‘catalysts for innovation’ to reduce supply side variability and demand uncertainty—the proximate causes of the notorious ‘bull whip effect’. These include what we refer to as the ‘readiness equation’, ‘mission-based forecasting’, ‘readiness-based sparing’ and ‘readiness responsive retrograde’.

Our goal is to develop a comprehensive modeling capacity to generate and test these innovation catalysts along with several other initiatives in order to estimate cost effective approaches before they are adopted as policy and implemented in practice. We are looking at performance analysis, organizational design, management information and decision support concepts, enterprise systems engineering and workforce considerations including human capital investment needs.

Examining the ‘catalysts’ in isolation, we have seen significant potential for improvement which could yield hundreds of millions of dollars in savings. When combined into new, integrated management practices, however, the potential magnitude for improvement is truly dramatic—billions of dollars in further savings are likely. More importantly, it becomes possible to relate investment levels to current readiness and future capabilities.

The center is capable of developing ‘management innovation as a strategic technology’ by integrating advanced analytics with transformational strategic planning. By harnessing, focusing and applying the power of analysis, we are promoting both qualitative and quantitative common sense—the compelling analytical arguments for necessary change to pursue a common vision. With this power, we are beginning to educate the Army’s leadership, motivate logistics managers to action and provide a source for innovation the culture can embrace. During our journey, we have certainly adapted and applied much from both academic domains and the corporate sector. They, in turn, might now benefit from what we have been able to learn and achieve as well.

Prior to his retirement, Colonel Parlier was the Army’s senior, most experienced operations research analyst and served as Army Aviation and Missile Command’s (AMCOM) Deputy Commander for Transformation. He is the author of Transforming U.S. Army Supply Chains: Strategies for Management Innovation, describing the analytical framework of a multi-year Army Materiel Command (AMC) research and development project providing operations research insights for use by the Army and Department of Defense.

Leave a Comment

Related Posts

Constructive Play with Digital Twins

Constructive Play with Digital Twins

Those of you who track hot topics will be familiar with the term “digital twin.” Those who have been too busy with work may want to read on and catch up. While there are several definitions of digital twin, here’s one that works well: A digital twin is a dynamic virtual copy of a physical asset, process, system, or environment that looks like and behaves identically to its real-world counterpart. A digital twin ingests data and replicates processes so you can predict possible performance outcomes and issues that the real-world product might undergo.

Direct to the Brain of the Boss – Inventory Analytics and Reporting

Direct to the Brain of the Boss – Inventory Analytics and Reporting

In this blog, the spotlight is cast on the software that creates reports for management, the silent hero that translates the beauty of furious calculations into actionable reports. Watch as the calculations, intricately guided by planners utilizing our software, seamlessly converge into Smart Operational Analytics (SOA) reports, dividing five key areas: inventory analysis, inventory performance, inventory trending, supplier performance, and demand anomalies.

How Are We Doing? KPI’s and KPP’s

How Are We Doing? KPI’s and KPP’s

Dealing with the day-to-day of inventory management can keep you busy. But you know you have to get your head up now and then to see where you’re heading. For that, your inventory software should show you metrics – and not just one, but a full set of metrics or KPI’s – Key Performance Indicators.

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. […]