Demand Planning, Safety Stock Software, and Lead Time Formulas in Distribution & Manufacturing Environments
Many people do not know how to forecast inventory demand, how to manage inventory effectively, or how to plan inventory purchases and transfer order forecasts. Some these problems are related to training while others are related to their distribution inventory planning and accounting systems.
Some ERP systems like Sage 500 include formulas which allow you to calculate future demand, safety stock levels, and lead times based on historical information. This is useful in some environments where there is a lot of consistency.
However, using formulas alone for Demand Planning, safety stock levels, and lead times can be fraught with errors in most distribution and manufacturing environments. For example, most business to business companies have fluctuations in their demand that is unpredictable and even systems that support seasonality cannot identify patterns in demand. Even when seasonality is prevalent, the demand may vary slightly from period to period. Further, vendor lead times also vary depending on resource constraints and other factors.
Forecast bill of materials demand is more difficult for MRP planners and DRP buyers to manage manually and sales demand forecasting is probably the best way to manage Demand Planning in many (if not most) distribution and manufacturing scenarios. Sales forecasting within applications like Anytime 500 and Anytime Supply Chain (www.anytimesupplychain.com) software allow educated planners to analyze demand history and to consider extraneous factors that will impact the current period manufacturing and supplier inventory forecast. Further, unconsumed, forecasted inventory demand can be optionally rolled forward to future MRP/DRP planning software periods to cover those situations when an order was expected in a particular period but slipped to the next period.
We also recommend that companies continually analyze their lead times and safety stock levels through reports and alerts within their ERP business systems. You may need to adjust safety stock software planning and safety stock software levels, for example, to higher levels during periods where there is greater demand and you may need to increase or decrease lead times due to supplier availability or at least consider alternative suppliers in case they cannot fulfill your demands within the desired time frame.