Author: kathleenpassafume

Forecasting 101: Yes, your forecast is wrong….now what?

If you didn’t know, no forecast is 100% accurate. At their core, forecasts are the best guess of what will happen, an educated guess. But it’s still a guess of human behavior which is difficult under the best of circumstances.

And yes, the accuracy of a forecast can improve with time. A myriad of models, formulas and theories can be applied to drive improvements. But what happens when you don’t have the time because the delta between forecast and actual is too large and/or the results impact business today?

First, keep working on the forecast. Forecasts drive multiple aspects of business, so work to improve the accuracy by:

  1. Reviewing accuracy monthly – Set up a monthly review to compare the forecast to what happened.
  2. Figure out where the miss occurred – Analyze the formulas/data/assumptions included in the original forecast to determine where the misalignment occurred.
  3. Adjust the forecast where needed – If you identify formulas/data/assumptions are the cause, adjust where needed.

In the meantime, here are three things you can do right now to mitigate the impact of forecast accuracy challenges:

  1. Use historical demand – Include a review of 12- or 3-month demand. Ideally, you would pick one or the other to reduce complexity and the possibility of someone picking whatever number they like.
  2. Use inventory analysis to categorize – Analyze your inventory, assign volume and volatility categories to each item. Determine your high volume items using (A.B,C analysis) and your high volatility (X,Y,Z analysis).
  3. Create a service level matrix based on categorization. – Create a matrix based on business needs for coverage. For example:
  1. If you have a high volume, low volatility item (A,X) you may want a high service level, and set it up with a smaller safety stock with consistent deliveries.
  2. If you have a low volume, high volatility item (C,Z) you may want a lower service level, and set it as on demand only or carry a set amount and only replace as needed.

Questions? Feel free to reach out.

Forecasting 101 – How to Forecast Manufacturing in a High Customization Environment in D365.

Forecasting can seem impossible when manufacturing in an environment with a high volume of custom products. Multiple SKUs are used, and the components used in those SKUs are highly variable. So, what should be done?

If you are already using MRP in D365, one way is to follow these four steps.

1.     Calculate the ave. forecast by SKU. – Calculate the ave. number of custom assemblies by SKUs you produce each month.

2.     Calculate the attachment rate per component per SKU. – Calculate the ave. percentage you attach a given component to that SKU.

–         For example, if you build SKU X 10 times a month, how many times does that build contain each component?

–         If a component is included in each build that component would be 100%. If it is only 7 times out of 10 that would be 70%.

3. Setup Item Allocation Keys—In D365, Set up Item Allocation Keys for each SKU. Add all components and assign the Attachment rates.

4.     Add a Demand Lines Forecast for each SKU Item Allocation Key.

Questions/Comments? Feel free to reach out.

Bill of Materials 101: Manufacturing BOM vs Planning BOM

Bill of Materials (BOM) are an important part of any manufacturing process. Bills of Materials contain all the parts (including assemblies and sub-assemblies), raw materials, and components to manufacture a product. Keeping these lists correct ensures accuracy in the production process, and provide supporting (procurement, planning, etc.) functions critical information.

While Bills of Materials can be used in various applications, two of the most common types are Manufacturing and Planning. Both types contain parts, raw materials, and components but have different structures and uses.

Manufacturing Bills of Material (BOM) –

Contents: Manufacturing BOM’s contain all the parts (including assemblies and sub-assemblies), raw materials and components to manufacture a product.

Structure: They are structured to reflect the actual manufacturing process on the production floor.

Use: Used to manufacture products.

Planning Bills of Materials (BOM) –

Contents: Planning BOM’s contain all the parts raw materials and components to manufacture a product. They generally don’t include the manufacturing structures (assemblies and sub-assemblies).

Structure: They are structured to reflect the material forecasting process.

Use: Used for Material Requirements Planning.

Questions? Feel free to reach out.

Problem Solving 101: Find before you fix

When businesses encounter problems, sometimes there is a rush to fix the symptoms instead of finding the root cause. This is an expensive and frustrating mistake that often resembles a game called Wack a Mole. You “fix” one symptom and another pops up.

This is why it is important to take the time to investigate root cause(s) before you attempt/propose any fix. This way you can ensure that your efforts resolve the actual root cause in cost effective and efficient ways.

Not sure how to find the root cause? Try the 5 Whys. It is an excellent problem-solving technique where the question “Why” is asked and answered repeatedly, usually 5 times, to get to the root cause.

Questions? Feel free to reach out.