| How Good Is Your Forecast?
(ROOT CAUSE ANALYSIS)
PEER Planner goes
far beyond the basic statistical forecasting models. Interactive, high resolution
graphical displays improve decision making by: You can use this feature to measure demand variability by customer and in total using
product lead-times, as desired. Multiple measures are provided for ranking product by
exceptions so that you can determine which customers or location-specific segments are
causing the most variability. ______________
You can use this feature to measure demand variability by customer and in total using product lead-times, as desired. Multiple measures are provided for ranking product by exceptions so that you can determine which customers or location-specific segments are causing the most variability.
For Eastman Kodak, the picture was clear: the potential cost reductions and planning improvements were so compelling that it was an easy decision to implement Peer Planner.
Peer Planner is building a bridge with our customers, giving us a way to improve planning and processes across organizations said Len DiGristina a supply chain manager and long-time employee of the Rochester, N.Y. company.
Len works in Supply Chain Management and Logistics, a unit that supports Kodaks worldwide chemical and synthetics manufacturing operations. They assist with master scheduling, inventory management, and production planning for internal customers, some thirty sites scattered around the globe.
Kodak stocks about 2,000 different types of chemicals. These are converted to 400 end chemicals, which in turn help produce film and paper products for Kodak.
Lens group is responsible for $60 million in inventory, which carries a safety cushion of $20 million at any given time. He realized that the latter number could be reduced without compromising customer service levels if his group could better understand, and reduce, forecast error.
Previously, Kodak looked at demand variability at the catalog number level. To get down to the SKU level required a laborious process of printing screenshots from their MRP system for each SKU.
Now, data from the MRP system is loaded into Peer Planner. The program shows graphically, on one screen, a view of forecasted versus actual demand for each customer over time. These reports can be printed or distributed electronically.
Armed with this information, Lens group is now in a better position to get to the root cause of demand variability. We are elevating the level of data with our customers, said Len. Its a little bit like behavior modification. If you are at the top of the list, if the forecast error is significant, we must figure out why the behavior is bad.
And, the way Len sees it, just a couple of big hits would pay for Peer Planner. Kodaks inventory carrying costs are 30%. If we can reduce our safety stock by just ½%, it would be a big win.
Kodak is also relying on Peer Planner to improve the quality of long term strategic planning.
Their annual operating plan takes an 18-month view of expected demand. It is updated monthly in a process vital to understanding Kodaks capacity to deliver in this time frame, and how to best load plants.
Here, again, Len expects that Peer Planners time-lapse snapshot of forecasted data will help pinpoint which customers are causing the most long-term demand variability.
It is a nice thing to be able to capture forecast every week, to see who is doing the changing, explained Len. For example, if customer A forecasts 50K units for 1998, and three week later, the annual drops to 20K, we would want to know why. A good reason would be their sales forecast changed; a bad one would be scheduling error.
They have spent much of the past several months readying Peer Planner for a launch; much of the work involved running tests, and setting the system up to receive data inloads from their Xantel master scheduling system. Although the system wont be fully operational until May, Len agrees that by all indications Peer Planner will be a success.