Auto-Replenishment-2

When calculating the material requirement, Asprova can check the inventory of the raw material and parts and automatically generate replenishment orders. This is the Auto-Replenishment function of Asprova.

There are two ways to generate replenishment orders: 1) we can replenish one to one for each order, or 2) calculate the total requirement and replenish at once by registering the lot size.

In this Integrated master editor table, the only items to be produced are shown. Item “AX” is produced by assembling the production item “A” and the purchase item “X”.

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Three sales orders are registered in the Order table.

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As the manufacturing order has not been registered yet, rescheduling it would mean item “AX” is out of stock.

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Let’s set up the auto-replenishment order for items “AX” in the Item table. Since we want to give manufacturing instructions for each sales order of item “AX”, update auto-replenishment as “Yes (one-to-one production)”.

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Run the reschedule button. By doing this, the manufacturing order will be automatically registered when the inventory of item “AX” runs out of stock.

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On the other hand, as the stock of items “A” and “X” will also run out, we need to set auto-replenishment as well.

For items “A” and “X”, since we produce and purchase these items at once, set “Yes” for the [Auto-replenishment flag] and register the lot size. For item “A”, register 500 for production lot size MAX. For item “X”, as it is a purchase item, set “Purchase” for the Obtain method property. Then, register the lot size at the Purchase lot size MIN/MAX at 5000.

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Run the Reschedule button. The schedule changes to produce item “A” with a quantity of no more than 500 items at once. As we purchase “X” in a large quantity, only one purchase order will be generated.

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The one-to-one replenishment order is often used for made-to-measure items or individual items
and the replenishment order with lot size is often used for mass-production.

There are a lot of additional features based on the auto-replenishment, for example: time period grouping and inventory control. To learn more about Asprova specific to this sample demonstration, you may visit Asprova’s online help and search Operation Split or its e-Learning videos at http://lib.asprova.com/ (see 24. Scheduling Logic).

 

Significance of Demand Forecasting

AsprovaMost business decisions of an organization are made under the conditions of risk and uncertainty. However, an organization can lessen the adverse effects of such risks by properly determining the demand or sales prospects for its products and services in future. Demand forecasting is a systematic process that involves anticipating the demand for the product and services of an organization in future under a set of uncontrollable and competitive forces. It helps businesses find a proper balance between supply and demand. In order for this to work, the supply chain must ensure that the amount of items produced satisfies customer demands without a surplus of inventory being left over. At the same time, the forecast must be accurate enough to satisfy customer demand; otherwise, the manufacturer will fail to deliver the right amount of finished products to the customer. Forecasting is an imperfect science, but it is also a necessity for several reasons given below:

Support Deliverables Planning Proper forecasting can help determine when increases in deliveries are needed. Historical reports may be used to research whether demand for a certain product increases during certain times of the year. The inventory levels for the store can then be increased during that time of the year to meet customer demands. The same effort is used to reduce deliveries, as well. When demand decreases throughout the year, then fewer inventories can be ordered to reduce overstock. In essence, forecast information allows organizations to devise and execute transportation planning economically and effectively.

Enhanced Growth Prediction– Demand forecasting helps an organization in deciding about the expansion of its business. If the expected demand for products is higher, then the organization may plan to expand further. On the other hand, if the demand for products is expected to fall, the organization may cut down the investment in the business. This further helps an organization to hire human resource according to requirement. For example, if an organization expects a rise in the demand for its products, it may opt for extra labor to fulfill the increased demand.

Better Financial Management-Proper forecasting will lead to accuracy in the purchasing and planning department, which can provide savings to the company. Spending excess amounts on unwanted inventory prevents the company from using this money on other vital resources. Some of these resources, such as investments, are important for growth and development of the company. Proper forecasting also helps the company purchase smaller amounts of inventory. These smaller quantities allow the company to remain flexible by being able to quickly respond to any changes in consumer demand.

Accurate Inventory Levels-Accuracy in sales forecasting allows supply chain managers to make accurate predictions in the level of inventory required to meet customer demand. An organization that practices lean philosophies must have the ability to make accurate predictions on the level of inventory necessary to produce products. Lean management requires the company to keep the lowest level of inventory in stock to meet the demand. With lower levels of inventory, the accuracy of the amount stored on hand becomes even more important. Inaccurate forecasts can result in overstocking or stock outs.

By minimizing inventory investment and increasing revenue opportunities, best-in-class Asprova solution enables a clear look into the future. In collaboration with demand forecasting software, our advanced planning and scheduling features facilitate businesses to generate accurate forecasts based on true demand which eliminate poor results such as lost sales, product obsolescence and overstocks – all that can equate to lower revenues and margins.

 

Supply Chain Drivers

AsprovaIn today’s dynamic business world, forward-thinking companies emphasize the applicability of supply chain management as a crucial element of overall business strategy. However, companies that desire an effective supply chain management must first have a crystal clear understanding of each driver and how it operates. Each driver has the ability to directly affect the supply chain and enable certain capabilities. Then the next step is to develop an appreciation for the results that can be obtained by mixing different combinations of these drivers. Let’s have a look here at these drivers individually.

Demand Planning- To influence and manage demand more efficiently, companies are now shifting their focus from plant-level production planning to demand-driven focus. In adopting a demand-driven model, it is very critical to decide what a firm is best at selling, making and delivering and align firm’s sales force according to that. Ultimately, this demand-driven approach can improve demand planning and management by creating a more customer-focused mindset. But to best achieve this, agreement among company’s internal stakeholders- sales, marketing, finance, product development etc. – upon a consensus demand plan is imperative.

Location-Decisions are related to which activities should be performed in each facility. Managers must decide whether to centralize activities in fewer locations to gain economies of scale and efficiency, or to decentralize activities in many locations close to customers and suppliers in order for operations to be more responsive. When making location decisions, managers need to consider a range of factors that relate to a given location including the cost of facilities, the cost of labor, skills available in the workforce, infrastructure conditions, taxes and tariffs, and proximity to suppliers and customers. Location decisions tend to be very strategic because they commit large amounts of money to long-term plans.

Inventory-Inventory is spread throughout the supply chain and includes everything from raw material to work in process to finished goods that are held by the manufacturers, distributors, and retailers in a supply chain. Holding large amounts of inventory allows a company or an entire supply chain to be very responsive to fluctuations in customer demand. However, the creation and storage of inventory is a cost and to achieve high levels of efficiency, the cost of inventory should be kept as low as possible. Toyota has worked hard to shorten new product and replenishment lead times. As a result, the company is very responsive and carries low levels of inventory.

Transportation Movement of everything from raw material to finished goods between different facilities in a supply chain. In transportation the trade-off between responsiveness and efficiency is manifested in the choice of transport mode. Fast modes of transport such as airplanes are very responsive but also more costly. Slower modes such as ship and rail are very cost efficient but not as responsive. Since transportation costs can be as much as a third of the operating cost of a supply chain, decisions made here are very important. A mail-order catalog company can use a faster mode of transportation such as FedEx to ship products, thus making its supply chain more responsive, but also less efficient given the high costs associated.

Information- It is potentially the biggest driver of performance in the supply chain because it directly affects each of the other drivers. It is the connection between all of the activities and operations in a supply chain. To the extent that this connection is a strong one, (i.e., the data is accurate, timely, and complete), the companies in a supply chain will each be able to make good decisions for their own operations. This will also tend to maximize the profitability of the supply chain as a whole. Seven-Eleven Japan has used information to increase the responsiveness while also lowering cost.

Asprova is critical to identify, understand and measure how certain business drivers impact the supply chain and the company’s business growth. Our advanced planning and scheduling functions provide systematic, strategic coordination of planning, production, inventory, and information among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served.

 

Photo credit: Flickr ©Scott Maxwell

Seven Types of Waste

Flickr © Graham Hellewell

Taiichi Ohno, the architect of the Toyota Production System developed the concept of ‘MUDA’ (無駄) or ‘’Waste’  is applicable equally to both manufacturing and the service sector of the economy. These seven wastes are described below:

Over-Production: This usually happens because of working with oversize batches, long lead times and poor supplier relations. The key element of  JIT is making only the quantity required of any component or product. Sound stock management procedures and production techniques are necessary to ensure that the correct quantities are ordered and made.

(Read also Just In Time Schedule)

Excessive Inventory: Unwanted inventory costs you money – besides, it needs space and packaging. It can also get damaged during transportation and become obsolete. Every piece of product tied up in work in progress or finished goods have a cost and until it is sold that cost have to be borne. So the objective is to carry as little as possible to meet the requirements (see here how one company reduced finished goods inventory by 62.8%).

Waiting Time: Machines that are not compatible and produce at different rates can cause waiting on the production line. So processes become ineffective and add no value – only cost and inconvenience. Instead, the flow of operations should be smooth and continuous. Asprova supports eliminating unnecessary waiting time between processes by synchronizing multiple processes in the schedule.

Unnecessary Motions: It concerns the design of movement within the working environment as resources are wasted when workers have to end, reach or walk distances to do their jobs. It is vital to make sure that every movement is minimized while still performing the required task. So workplace ergonomics assessment should be conducted to design a more efficient environment.

Redundant Transportation: Moving a product between manufacturing processes adds no value, is expensive and can cause damage or product deterioration. So loads should be maximized; goods should be transported to the correct location and not require additional transportation.

Defects: Products should be designed so as to build in quality from the outset through good use of materials and processes. Defects require an organization to instigate post-manufacturing inspection processes with consequent costs and may involve re-working of an item or failure to meet customer service requirements.

In-appropriate Processing: A basic principle of the TPS is doing only what is appropriate. Improper techniques, oversize equipment, working to tolerances that are too tight, perform processes that are not required by the customer’s costs time and money. Hence overly elaborate and expensive equipment is wasteful if simpler machinery could do the job.

Asprova has always strive to go an extra mile by collaborating with their clients to eliminate overproduction and reduce stock-holdings, while minimizing stock-outs.

 

 

Photo Credit: Flickr ©Graham Hellewell

Can Asprova Tell the Material Inventory Availability?

Answer summary:

Yes, through inventory graph. You can also use Auto replenishment so that you will be notified as to when you need to purchase materials (raw). See Videos 22.04 to 22.08

royalty-free-warehouse-clipart-illustration-439310Presidents, CEOs, directors, and other high-level executives recognise the importance of inventory management. Even the most attentive and detailed-oriented manager is no match in getting the exact level of it. Most of the time decision makers rely only on the external benchmarks that seldom deliver the expected insights. This might lead them to the wrong path when they are making the operating assumptions. Getting the right levels of the inventory is important since it not only controls costs but also measures the company’s overall health.[1].

Accounting for inventory in manufacturing environment is often more complex compare with inventory accounting in other business setups. Manufacturers account for production inventory when making plans, schedules and valuating raw materials needed for production. One of the most essential steps in managing your inventory while making production plan is knowing the availability and quantity of every resources and materials[2].

Inventory Graph

Asprova can easily monitor the availability of materials through the inventory graph.  It can check whether there is a shortage of materials or none. The graph will tell you the exact date and time on when the materials will be depleted and can give you a visualization of which operation will have a shortage in materials. In addition, Asprova has an auto-replenishment function where it can automatically replenish insufficient and depleted items for production orders and purchase orders. Auto-replenishment will also notify you if you already needed to purchase raw materials.

Monitoring the quantity and availability of every material is only one of many ways on how Asprova can help you manage your inventory. It is still best to have a hands-on experience on monitoring your inventory using Asprova. See it for yourself. Download the free trial version of Asprova and watch the tutorial videos for more information.

[1]www.bain.com/publications/articles/ten-ways-to-improve-your-inventory-management-wsj.aspx (Date Accessed: June 15, 2014)
[2]http://smallbusiness.chron.com/production-inventory-17468.html (Date Accessed: June 15, 2014)