THE ROLE OF DEMAND PLANNING IN IMPORT SUPPLY CHAINS · Systems (DPS) Enterprise Resource Planning (ERP) Demand Fulfillment Systems Warehouse Mgmt. Systems (WMS) Enterprise Resource

THE ROLE OF

DEMAND PLANNING IN

IMPORT SUPPLY CHAINS

THE MERCADO INSTITUTE OF

INTERNATIONAL TRADE

NOVEMBER 6, 2019

2proprietary + confidential © Mercado 2020

• Help importers and their supply chain partners to

be more competitive in their trade endeavors

– Heighten awareness of the strategic, tactical, and

financial considerations inherent to the import

process

– Broaden perspective on the multi-functional and

multi-player nature of importing

SIX- INSTALLMENT WEBINAR SERIES:OBJECTIVE


• 11/20/19: Buy: Essential Clauses to Include in Your International Purchase Agreement

and Purchase Order

• 12/4/19: Bonus Webinar: Incoterms® 2020 Rules

• 12/18/19: Move: The ABC’s of International Shipping & Customs Compliance

• 1/8/20: Buy & Move: Five Ways to Reduce Import Costs

SIX- INSTALLMENT IMPORT WEBINAR SERIES:REMAINING SCHEDULE (ALL EVENTS 10 :30 A .M. PST)


• Introduction to Mercado Labs

• Omni-Channel and Demand Planning defined

• Challenges for Demand Planning in an Omni-

Channel distribution model

• How Demand Planning impacts import supply

chains (and vice versa)

• Best Practices for continuous improvement of

the Demand Planning function

TODAY’S AGENDA


Digitize your First Mile,

Transform your Global Supply Chain

? ? ?

CURRENT STATE – Importers have systems to plan and sell products, however no system to manage product supply.

PLAN SELLBUY MOVE

Order Planning Systems

Demand Planning

Systems (DPS)

Enterprise Resource

Planning (ERP)

Demand Fulfillment Systems

Warehouse Mgmt.

Systems (WMS)

Enterprise Resource

Planning (ERP)

No – System.- 1st mile. Inventory.

Disconnected Supply Chain

THE MISSING L INKIN YOUR SUPPLY CHAIN


BRING ORDER TO YOUR IMPORTS

Affordable. Easy to Implement. Easy to Use.

MERCADO PLATFORM -

PLAN SELLBUY MOVE


Demand Planning

Systems (DPS)

Enterprise Resource

Planning (ERP)


Warehouse

Management

Systems (WMS)

Enterprise Resource

Planning (ERP)

Networked Supply Chain!

Mercado - Order Management System


• Who needs Mercado?

– Importers and your supply chain ecosystem

• Why do you need Mercado?

– Increase sales

– Decrease landed cost

– Compress cumulative lead-time

– Optimize inventory levels

TRANSFORM YOUR GLOBAL SUPPLY CHAIN


THE IMPORT MODEL FOR TODAY’S WEBINAR:HOME GOODS SOLD VIA OMNI -CHANNEL

• Importer of Home Goods (under the

importer’s brand and Private Label)

• Outsourced production

– China & SE Asia

• Three distribution centers

– Fontana, CA; Dallas, TX; Mechanicsburg, PA

• Omni-Channel distribution model

– Retail stores, catalogue, web sales, Private

Label


• “Omni-Channel” describes the multiple

distribution channels through which companies

sell their products to customers (B2C and B2B)

– Retail stores

– Catalogue

– On-line store

– Institutional sales (salespeople in the field)

– Amazon

– Export

OMNI -CHANNEL DEFINED


• “Demand Management” refers to the ongoing

process of identifying and planning for all

sources of product/service demand

• Demand Management requires that practitioners

weigh demand against production capacity

• In an outsourced production model, that means

the production capacity of overseas suppliers

– Quantities & timing of purchase orders on

vendors

DEMAND MANAGEMENT DEFINED


• Demand Management encompasses a number

of functional activities

– Forecasting

– Order management (customer orders)

– Available to Promise (ATP)

– Sharing of demand signals with other import

supply chain functions (inventory management,

sales, purchasing, finance, etc.)

• Demand Management can overlap with

Inventory Management (depending on

organizational structure)

DEMAND MANAGEMENT DEFINED


MANUFACTURING PLANNING &

CONTROL IS OUTSOURCED

TO THE SUPPLIER

THE MAIN CHALLENGE OF OUTSOURCED PRODUCTION:

DE-COUPLING OF BUY SIDE & SELL SIDE FUNCTIONS


• MP&C is the process through which sales

forecasts and/or actual sales orders are translated

in production activities (POs on vendors)

• MP&C activities include:

– Production Planning

– Master Production Scheduling

– Material Requirements Planning

– Capacity Planning

• In an outsourced production model, MP&C

activities are executed by the overseas

supplier

MANUFACTURING PLANNING & CONTROL DEFINED


DEMAND PLANNING & IMPORT ACTIVIT IES IN AN

OMNI -CHANNEL/OUTSOURCED PRODUCTION MODEL


DEMAND MANAGEMENT:

A MORE DETAILED BREAK DOWN


• Tactically, supply chain activities begin with a

sales forecast

• A forecast is an estimate (or guess) of future

sales of a product

• The trouble for supply chain practitioners is that

forecasts are almost always wrong

– Having to deal with the variance between

forecasted demand and actual demand

DEMAND MANAGEMENT:

SALES FORECASTING


• Sales forecasts are more accurate for nearer

time periods (one month vs. one year)

• At a minimum, the forecast period for a product

must be at least as long as its Cumulative Lead

Time (CLT)

– Known as “Demand During Lead Time”

• This is why the constant measurement and

compressions of CLT is so important!

– The shorter the CLT, the greater the likelihood of

forecast accuracy

SALES FORECASTS &

CUMULATIVE LEAD TIMES


• Highly variable CLT causes importers to “pad”

actual lead time estimates, thus extending the

minimum forecast period

– Unpredictable lead time for product shipments

throughout the year

– “Just In Case” vs. “Just In Time”

• Bloated and/or unreliable CLTs also lead to

higher levels of Safety Stock

– To account for supply chain variances

SALES FORECASTS, CUMULATIVE LEAD TIMES &

INVENTORY LEVELS


• In addition to forecasting, Demand Management

professionals also have to account for actual

sales and customer orders

– Different sources of sales are known as “Demand

Signals”

• For Omni-Channel companies, keeping track off

multiples demand signals can be tricky

– Which in turn makes meeting demand (through

supply) even trickier

DEMAND MANAGEMENT:

SALES ORDER MANAGEMENT


• Item-specific forecasts are used to kick-off

tactical import activities

• As time progresses, actual demand appears in

the form of sales and/or customer orders

• As sales occur, quantities from the forecast

should be reduced (netted out)

– Known as “Consuming the Forecast”

• This practice lets importers know where they

stand currently, and for the balance of the year

– Do they need more, less or are they good with the

forecasted amount of a given product?

BEST PRACTICES FOR SALES ORDER MANAGEMENT:

CONSUMING THE FORECAST


Actual Demand Signals

Retail Stores Catalog Sales Web Sales U.S. Sales Force Export Sales

Vendor #1 Vendor #2 Vendor #3 Vendor #4 Vendor #5

Conversion of Demand Signals

To Purchase Orders

Sales ForecastAs actual sales take place and/or

orders are received from customers,

these demand signals must

“consume” the forecast. Updated

demand info then cascades up

the supply chain

As actual sales consume the forecast,

existing POs may be increased, decreased,

cancelled, or entirely new POs issued

DEMAND MANAGEMENT:

CONSUMING THE FORECAST


• Available To Promise (ATP) is the uncommitted

amount of a company’s current inventory and

planned production (outsourced)

– Current inventory on-hand

– Goods in transit from overseas vendors

– Outstanding Purchase Orders on vendors

• Importers use ATP data to allocate inventory to

different distribution channels and demand

signals (stores, on-line sales, catalogue, etc.)

DEMAND MANAGEMENT:

AVAILABLE TO PROMISE


• As importers use ATP to allocate both current

and planned inventory to customers, that

information must be (constantly) shared

upstream with the Purchasing department

– In order to manage the timing and quantities of

both current and future POs

– To avoid stock outs or excess inventory

DEMAND MANAGEMENT:

AVAILABLE TO PROMISE


Demand

ManagementInventory

Management

P.O.

Management

Inbound

Shipping

U.S. IMPORTER OVERSEAS SUPPLIER

Sales Order

Management

Material

Requirements

Planning

Master

Production

Schedule

Outbound

Shipping

INTEGRATION & SYNCRONIZATION OF

MULTIPLE FUNCTIONAL ACTIVITIES

ALIGNING DEMAND MANAGEMENT

ACROSS THE IMPORT SUPPLY CHAIN


• Tactically, a great deal of supply chain

management deals with making adjustments

between forecasted sales and actual demand

– Adjusting to variances between what we predicted

was going to happen and what’s really going on in

the marketplace

• Sales & Operations Planning (S&OP) is an

ongoing business activity across all supply chain

functions that identifies and accounts for

variances in a sales forecast

PLAN. BUY. MOVE. SELL.

TYING IT ALL TOGETHER WITH

SALES & OPERATIONS PLANNING (S&OP)


Affordable. Easy to Implement. Easy to Use.

MERCADO PLATFORM -

PLAN SELLBUY MOVE


Demand Planning

Systems (DPS)

Enterprise Resource

Planning (ERP)


Warehouse

Management

Systems (WMS)

Enterprise Resource

Planning (ERP)

Networked Supply Chain!

Mercado - Order Management System

TYING IT ALL TOGETHER WITH S&OP


• Website: mercadolabs.com

• Derek Siler, Inside Sales & Customer Support

– [email protected]

– 817.403.5923

THANK YOU!

mailto:[email protected]

Documents

THE ROLE OF DEMAND PLANNING IN IMPORT SUPPLY CHAINS · Systems (DPS) Enterprise Resource Planning (ERP) Demand Fulfillment Systems Warehouse Mgmt. Systems (WMS) Enterprise Resource