As a distributor, your largest and most costly asset is inventory. With the right forecasting technology profitability can be dramatically increased by carrying the correct amount of inventory each time! The correct inventory forecasting technology, such as Advanced Forecasting and Procurement developed by Lanham Associates, can allow your distribution company to reduce inventory carrying while increasing margins in turn this can have a greater effect on the bottom line than increasing sales. Better Inventory Forecasting for Better Margins can be achieved using this robust technology.
Methodogy for Better Inventory Forecasting:
Built inside Microsoft Dynamics NAV, Advanced Forecasting and Procurement (AFP) takes a a unique approach of incorporating vital forecasting and replenishment functions inside a single system, providing “Total Access to Data” such as:
Any forecasting tool is only as good as the accuracy of the historical data used to derive its forecast. AFP provides several ways to improve the accuracy of historical data:
• Filtered Usage – Only sales that are expected to reoccur should be considered as historical input for the forecast.
• One-time sales can be flagged by the customer service person and excluded from usage.
• Unusual usage is flagged by the system to provide the user a means of adjusting abnormalities.
• Smoothed Usage – Irregular usage can be automatically smoothed to improve usage patterns.
• Redirected Usage – Usage history from discontinued items can be reassigned to new items.
• Cloning – A percentage of Historical Usage can be cloned from an existing item to a new item. This allows you to forecast new items without waiting for historical usage to accumulate.
• Collaborative Input – Input from large customers who will
share their expected buying patterns can be included.
Best-Fit Forecast Method:
AFP Forecasting uses a Best-Fit Formula approach to ensure that the very best formula is automatically assigned to each item in each warehouse. The result is an extremely accurate 12- to 15-month forecast.
The 12-month forecast is presented with drill-down capabilities to allow the user to view the details of the forecast input, as well as the calculations used. In addition, the forecast is compared to the time-phased expected inventory and then utilized to predict the expected
inventory level for any point in the future.
Many times it is important to collaborate with your large customers relative to their expected purchases.
The collaborative forecast provides the user with a tool to import customer-provided forecasts and make them part of the overall forecast. In addition, AFP can use the forecasting engine to create a forecast specifically for a customer and export it to Excel. This provides the customer with input and also allows him to change the projections and return them to you for re-import into the system.
The collaborative forecast can be a valuable tool to improve the total forecast accuracy, but it is only valuable if it is more accurate than the statistical forecast. For this reason, the collaborative forecast is compared to actual to determine its accuracy.
The Total Forecast:
The total forecast is made up of the following:
• Statistical formula-based forecast
• Adjustments to the statistical forecast,
• Collaborative forecast
The forecast can be rolled up based on the categories you select, and can be presented in quantity, cost, or price. Adjustments made to any of the forecast summary levels can then be applied as individual adjustments to each item in that level.
Even a forecast that is 100% accurate does not solve the entire inventory management problem. Stocking levels, long and short lead times, unanticipated demand, surplus inventory, excess inventory, dead stock, late and early purchase orders, kits, and branch replenishment are only a few of the issues that must be handled each day. AFP places as much emphasis on replenishment as it does on the forecast. Creating an accurate forecast and coupling it with sound replenishment principles increases the effectiveness of both tools.
The suggested order is automatically created for each vendor during the overnight process. Buyers then review the suggested orders with access to all the calculations used to make the suggestion.
Using this information, the user can make changes to the suggested order, if necessary, before creating a purchase order. As the purchase order is created, the suggested order is also saved along with all information that was used to make the recommendation.
Learn more about Advanced Forecasting Technology for Distribution
Learn more about Advanced Forecasting Technology for Manufacturing