Sometimes ago I wrote an article about "Inventory Balancing & Optimization" which is a solution I specifically developed at DOWAP, to cover a recurring issue in Supply Chain.
At the same time Inventory Balancing come often with its contrary! Why balancing inventory and supplies whereas you can simply balance the demand itself over the Supply Chain Network?
Both concerns are valid and represent the two face of the same coin.
This post goes around the concept balancing process.
Root causes
When you need to balance goods between location, or reshuffle demand distribution on DCs, this means something went wrong in planning, or in execution. In short, not everything happened as expected, as planned.
Questions you may think:
Our ERP tool is not helping planning correctly our Supply Chain!
We missed anticipation in demand shaping.
We failed deploying goods at the right place.
Our process are to slow to adapt.
etc..
In fact, no one can really be 100% accurate in planning. There is always a discrepancy between planning and execution. Many reasons to that, like MRP base concept states too many pre-requisites which never come together, therefore deviation exist. Regardless running an MRP logic from ERP or in an APS, the reality rarely matches with planning.
The right way forward is to understand, organize internally and manage reccurent discrepancies whereas you engage process transformation to improve your score in the future.
Your company Supply Chain setting represented a huge investment, a long implementation time and provides you with actual and tangible results. Therefore as long as your expediting process represents only a little part of your big picture, this is okay. Expediting tends to resolves issues, and sometimes to optimize the flow of goods, or information.
Balancing Inventory/Supplies or balancing Demand?
Both are kind of expediting options about the same issue. The demand, orders or forecast, do not sit on the same location (Plants, DCs) where the inventory and the supplies are planned. This mismatch leads to uncovered demand on one hand, and to overstocking issue on the other hand.
Balancing Goods means extra cost in material handling and transport, however it also means you are going to match a demand that will bring revenues. As long as the extra cost does not kill the overall margin, you are optimizing the company’s revenue! Isn’t it? Is it the maximum? Not really, however better than not doing the revenue.
Balancing Demand is of 2 kinds, depending it is an actual sales order, or from a forecasted demand.
Balancing forecast drives planning results to position the stock where the demand will/shall be. So imagine that analysing short term order portfolio you observe mis-positioned forecast, it becomes interesting to relocate the forecast to drive the replenishment plan to the proper locations. This will helps not moving goods later, to create a better deployment plan.
On the other hand, in the short term if orders are really erratic, coming to the wrong delivering locations, you may find some optimization potential by serving from another location, with extra tansportation cost, instead of bulking demand in the backorder list.
How to balance
Actually most of the companies worldwide run this balancing options MANUALLY!! Not so bad in fact, however repeating and repeating same tasks is not rewarding, leading to stress, particularly in peak season. It is not a sustainable situation!
The more advanced companies have implemented an advanced planning solution to run things like Global ATP to balance the orders between locations, or Optimized their planning, using IBP Optimizer for instance, to balance the inventory and supplies. In both case, the solution is very complex, sensitive with lots of data to maintain carefully (Optimization). Seems overdesigned to me.
let’s see how Excel can help…
Solution: Pragmatic and quick! Go balancing with a simple application.
Here the idea is to remain simple and pragmatic during balancing, so that anyone can quickly grab the concept and introduce his own rules. No optimum required, feasible plan is already good enough.
Go Inventory balancing, go order balancing, go forecast balancing as simple as running a single XSBS cockpit, that detects potential balancing options for you and lets you choose which action to take.
Balancing proposition can take place before your planning run, or after. When done before, the balancing is smoothing out existing issues so that next MRP planning run only cover true demand, not mis-positioned ones. When running balancing after your MRP run, results are lower, however you help re-deploying goods in short term for instance.
Balancing performs several analysis of projected elements, like stock, forecast, orders, in the company network, then determines a virtual rebalancing plan between locations.
3 options depending the cases.
Via transport propositions, for inventory and supplies balancing.
Via switch of locations of forecast whenever forecast balancing is requested.
Via delivering plant switch whenever sales orders are concerned.
Implementing such a solution is a matter of couple weeks before it runs and provide already first results. XSBS is definitely a good friend to perform this
Should you wish further information on these concepts, feel free asking us.
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