How food-manufacturers turn demand forecasting into a competitive edge:
• Carry less raw materials and Finished goods inventory
• Fewer write-offs of perishable and expensive ingredients
• Ability to negotiate contract pricing with suppliers
• Longer production runs, more throughout with less change overs
• “what if” scenarios allow for strategic purchasing and production planning
• Lower fright costs from less expediting of raw materials.
2. Please feel free to ask questions throughout the presentation
using the Q & A entry area in GoTo Webinar
Questions will all be addressed at the end of the presentation
Recordings of the presentation will be made available to all
attendees
Copies of the slide decks will be made available to the attendees
3. Introduction
SYSPRO Software – who we are
SYSPRO in the Food Industry
Industry insights on Forecasting in the food industry
Demonstration – how Forecasting benefits entire company
Closing and Questions and Answers
4. Mauricio Lozano
Director of Operations for Nectar Juicery, Instructor in the BCIT Operations Management program, and
industry visionary specializing in some of the most important challenges facing food manufacturers.
Steve Bassaw
Supply chain professional of 20 years whose experience includes materials management for one of BC's
largest food processors and advising the BCIT Operations Management program. Steve is a Product
Owner and supply chain specialist with SYSPRO Canada.
5. Global Organization
One of largest independent suppliers of Enterprise Business Solutions
14,500+ companies using SYSPRO Globally
Customers in 63+ countries across 6 continents
1,100+ Food and Beverage customers globally
1,300+ companies using SYSPRO in Canada
Highest customer retention in the industry
Specializing in manufacturers and wholesale distributors
6.
7. A tool for making better decisions & happier customers
Look at past inventory usage ...
... to predict future needs ...
... with some adjustments for reality
8. Companies that have formal forecasting:
Increase inventory turns
Reduce inventory levels by over 20%
On $1 M in inventory
$200,000 injection of cash
$ 50,000 in carrying charges
Increased “Availability” by 10%
(# of sales) / (# sales + # lost sales)
$4M in sales at 30% GP = $120,000
Forecasting saves money
10. fore·cast
ˈfôrˌkast/
Verb
1. predict or estimate (a future
event or trend)."rain is forecast
for eastern Ohio"
synonyms:
Predict, prophesy,
prognosticate, foretell, foresee,
forewarn of "they forecast
record profits”s
noun
noun: forecast; plural noun:
forecasts
1. a prediction or estimate of
future events, especially coming
weather or a financial trend.
synonyms:
Prediction, prophecy,
forewarning, prognostication,
augury, divination, prognosis “a
12. Forecasting
Process of predicting a future event
Underlying basis of all business decisions
Sales
Marketing
Supply chain
Maintenance
Human Resources
Finance
13. Benefits
Sales
High service levels, require enough stock
Too much stock
Involves distressed product waste or discounted
Low stock
Involves dissatisfied customers, missed sales and bad reputation
14. Benefits
Marketing
Accurate budgeting for advertising
Marketing contribution planning
Knowing when and where to spend funds
Knowing when to remove spending to increase profit
Product life cycle stage
15. Benefits
Supply Chain
How much to produce & when to produce
Just in time management requires low levels of inventory or no inventory
Better purchasing contracts
Product storage is costly
Some supplies are sensitive to shelflife
16. Issues with over producing
Scrap
Setup
time
Quality
problem
Late
s
deliveries
Process
downtime
Scrap
Setup
time
Quality
problem
Late
s
deliveries
Process
downtime
Inventory
level
Inventory
level
17. Benefits
Maintenance
When to schedule preventive maintenance
Anticipating equipment purchases
Scheduling overhauling
Project Management
18. Benefits
Human Resources
Right staffing level
Decisions on hiring or layoffs
Planning for vacations and holidays
19. Benefits
Finance
Profits planning
Earnings per share
Accurate overhead absorption
Underestimating volume can mean negative variances in utilities, taxes and
salaries
20. Types of Forecasts by Time
Horizon
Short Range
• 1 to 12 months
• Just in Time
manufacturing
plan
• Master
Production
Schedule
Medium Range
• 3 months to 3
years
• Budgeting
• Purchasing
contracts
• Profits
projections
Long Range
• >3 Years
• Capacity
planning
• Product
launches and
discontinuation
21. Product Life Cycle
Introduction
Growth
Maturity
Decline
In what stage is your product?
22. Introduction Growth Maturity Decline
Moving Average
Polynomial Regression
Y = ax2 + bx + c
Linear Regression
Y = ax + b
Exponential Smoothing
Ft = Ft-1 + (At-1 – Ft-1)
Linear Regression (Trend
Line)
Y = ax + b
Least Squares
Best period to
increase market
share
R&D product
engineering critical
Exponential Smoothing with
Trend Adjustment
Ft = Ft-1 + (At-1 – Ft-1)
Tt = (Ft - Ft-1) + (1- )Tt-1
Practical to change
price or quality image
Strengthen niche
Cost control
critical
Poor time to change
image, price, or quality
Competitive costs become
critical
Defend market position
Company Strategy/Issues
Best Model to
Forecast
Sales
x y nx y
x nx
b
i
n
i
i i
n
i
a y bx
23. Forecasting issues
Using shipment history
Relying on bad data
Excessive "gut feel" overrides
Poor event planning
Senior management meddling
Failing to measure sales forecast accuracy
Safety stock based on forecast error
Tolbert, Fred. 7 sins of Sales Forecasing. APICS
29. BENEFIT REASON
Save time creating PO’s Forecasts drive Suggested PO’s
vs. spreadsheets/winging it
Buyers more proactive, strategic Forecasts = predictability = less
fire-fighting
Lower raw material costs Negotiate contract prices vs.
spot market
Lower freight costs Less expediting inbound raw
materials
“What-if” agility See effects of forecast changes
Less storage space needed Carry less inventory
30. BENEFIT REASON
Save time creating Jobs Forecasts drive Suggested Jobs
vs. spreadsheets/winging it
More proactive More predictable, longer
production runs
Lower production costs Higher throughput, fewer
changeovers, less O/T
“What-if” agility See effects of forecast changes
31. BENEFIT REASON
More money Carry less inventory on RM and
FG
More money Higher service levels to
customers = higher revenue
Lower costs Supplier contract prices vs. spot
market
Lower costs Less expediting of inbound raw
materials and outbound sales
Lower costs Less O/T in production
Lower costs Fewer write-offs of expired items
32. BENEFIT REASON
Higher sales Higher service levels
Fewer lost customers Higher service levels
Saves time Automated forecasts vs.
spreadsheets
33. Simplify your business
Support forecasting requirements
Improve productivity
Realize fast, long-term ROI
Extend insight across your organization
Rapid deployment
A well experienced, national team
