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Dealing With Seasonality in Distribution Environments - Amir Schragenheim & Amir Weisenstern, Inherent Simplicity
Dealing With Seasonality in Distribution Environments - Amir Schragenheim & Amir Weisenstern, Inherent Simplicity
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© 2007 Inherent Simplicity. All rights reserved.
Holiday/Promotion
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© 2007 Inherent Simplicity. All rights reserved.
New Product Introduction
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© 2007 Inherent Simplicity. All rights reserved.
“Reverse” seasonality
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© 2007 Inherent Simplicity. All rights reserved.
Our focus
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© 2007 Inherent Simplicity. All rights reserved.
Sharp Demand Changes
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Sharp Demand Increase
Sharp Demand Decrease
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How will DBM cope?
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© 2007 Inherent Simplicity. All rights reserved.
DBM
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• Assumptions
− Demand is continuous
• Benefits
− Highly reactive
− Pushes for a short replenishment time
− Logic is simple to explain
− Stable (doesn’t change every day)
• Shortcomings
− Disregards knowledge of future
− Adjusts slowly to sudden changes
− Disregards long history
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© 2007 Inherent Simplicity. All rights reserved.
Traditional forecast
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• Assumptions
− Everything can be predicted
− People will trust the output
• Benefits
− Can take into account knowledge about the future
− Takes into account long history
− Provides the best theoretical result if all data is accurate, and if
done frequently enough on all SKUs
• Shortcomings
− Usually predicts only the average sales and does not include
any estimation of the forecasting error
− Hard to understand for many people – causing overriding of
results
− Subjective and unstable – different user inputs would provide
different results
− Every recalculation of the forecast tends to be disruptive
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© 2007 Inherent Simplicity. All rights reserved.
Comparison for different
scenarios
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Forecast DBM
Continuous Demand Would give different daily Would give the best
results – resulting in an results – a stable system
unstable system and that changes and adjusts
noise periodically only when
needed
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© 2007 Inherent Simplicity. All rights reserved.
When to use each
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© 2007 Inherent Simplicity. All rights reserved.
The Inherent Simplicity steps
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1) Stock Buildup
− Order the needed stock at least a replenishment
time in advance – see whether you need to
order in small batches
2) Waiting for stock
− Waiting for stocks to arrive using the
forecasted buffer size – replenishing within the
period, but freezing DBM
3) Inside the high demand
− Act according to DBM
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© 2007 Inherent Simplicity. All rights reserved.
The Inherent Simplicity steps
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4) Stock Builddown
− Plan to reduce the buffer size enough time in
advance to not stay with too much inventory
− Thus canceling the replenishment process from
the point this was activated until the stock in
the system is below the new lower level
5) Back to normal
− Return to normal behavior – replenishing and
acting according to DBM
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© 2007 Inherent Simplicity. All rights reserved.
Sharp Demand Changes
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© 2007 Inherent Simplicity. All rights reserved.
Example
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© 2007 Inherent Simplicity. All rights reserved.
Example
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© 2007 Inherent Simplicity. All rights reserved.
Alternative transportation
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© 2007 Inherent Simplicity. All rights reserved.
Alternative transportation
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© 2007 Inherent Simplicity. All rights reserved.
About [Presenter]
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•Amir Schragenheim
•President of Inherent
Simplicity – a leading TOC
software company for
operations & distribution
•Previously developed several
computerized TOC
educational and simulation
tools for operations,
distribution and project
management
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© 2007 Inherent Simplicity. All rights reserved.
About [Presenter]
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•Amir Weisenstern
•President of Inherent
Simplicity – a leading TOC
software company for
operations & distribution
•Previously founded Invoke
solutions - developed a
breakthrough solution for
research over the internet
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© 2007 Inherent Simplicity. All rights reserved.