Forecasting your future - Archives

Labs, Senior Technical = Editor=20
March 1, = 2007=20

The=20 right forecasting and scheduling software can help, but = first do=20 your homework.

Consider=20 these January 2007 events: cherry blossoms in Washington DC, = cattle=20 stranded in Colorado snow without food, oranges frozen on = the tree=20 in California. Now think ahead to Independence Day and next = year=E2=80=99s=20 Super Bowl. While you may not be able to plan for events = like the=20 first three, you can plan for the up-tick in burgers on the = Fourth=20 of July and wing consumption in February. With the right = forecasting=20 and scheduling software, you=E2=80=99ll be sure to process = enough burgers=20 for the Fourth and wings for next year=E2=80=99s Super Bowl = parties.=20
Forecasting and scheduling software are two modules = usually=20 found in enterprise resource planning (ERP) packages that = help=20 extend supply chain capabilities. Often these modules also = exist in=20 manufacturing execution systems (MES) used on the shop floor = and,=20 occasionally, as standalone packages. Whether the top-down = approach=20 (using ERP software) or the bottoms-up approach (using the=20 shop-floor MES package extensions) will work the best has = been an=20 on-going discussion. Which route you pick should be chosen = with a=20 lot of forethought, research and involvement of key = employees.

Forecasting = systems=20

Enlarge this = picture

SCM demand planning graph shows actual = and predicted output over a period of months or years. Additional = functions include a replenishment planner and S&OP reports. = Source: Infor. "=20 = src=3D"http://www.foodengineeringmag.com/FE/Home/Images/Infor-SCM%20small= .jpg"=20 align=3Dleft = border=3D0>

SCM=20 demand planning graph shows actual and predicted = output=20 over a period of months or years. Additional = functions=20 include a replenishment planner and S&OP = reports.=20 Source:=20 = Infor.

According=20 to Greg O=E2=80=99 Neal, senior product strategy manager at = Junction=20 Solutions, a business without a demand planning process is = like=20 driving down the highway at 70 mph in a fog. It=E2=80=99s = virtually=20 impossible to know which way the road is going to bend until = it=E2=80=99s=20 sometimes too late. Implementing a forecasting solution is = the first=20 step toward lifting the fog.
Forecasting, according to = Nitesh=20 Verma, senior project manager at Batchmaster, helps to = identify and=20 quantify the annual, weekly and daily seasonality of sales = volumes,=20 material prices, etc. The goal is to satisfy the customer = without=20 facility overstaffing. Forecasting helps managers understand = what is=20 likely to occur and builds a consensus. The benefits of a=20 forecasting process go far beyond a series of historical = reports and=20 data. A formal process enables managers to understand the = nature,=20 duration and volume of sales and handle organizational = resources=20 and, ultimately, costs.
Forecasting software helps = processors get=20 a grip on customer demands and sales, but as Autumn Bayles, = senior=20 vice president of strategic operations and technology at = Tasty=20 Baking Company says, =E2=80=9CNo tool is psychic.=E2=80=9D = Don=E2=80=99t expect a=20 forecasting tool to protect against grain shortages, for = example.=20 =E2=80=9CYou can choose to hedge for disasters with = inventory, but this is=20 costly and, in the case of short shelf life ingredients, not = as=20 desirable, says Bayles.=E2=80=9D Forecasting=20 software can project what may happen to grain or beef prices = in the=20 event of a shortage. According to Oracle Senior Product = Strategy=20 Manager Todd Jamison, forecasting software captures changes = to=20 harvest estimates and archives them over time for subsequent = analysis. This assumes that the software has been primed = with the=20 correct data in the first place, which means processors must = know=20 their market and their entire supply chain.

It=E2=80=99s=20 not unreasonable, however, to expect some knowledge-based = help from=20 forecasting software when it comes to disasters. Associated = Grocers=20 of Florida was using a dated forecasting tool that was based = in a=20 batch system. With more than 33,000 food products shipping = and 1.3=20 million sq. ft. of distribution space across three centers = in=20 Florida, the wholesaler updated to a Logility package that = helps the=20 company cope with hurricanes. =E2=80=9CThe goals of our = hurricane planning=20 within Logility are to build up extra inventory quickly = prior to a=20 hurricane, change the mix of items that sell well before or = after a=20 hurricane has hit, protect next year=E2=80=99s forecast from = spikes or=20 valleys, maintain extra inventory on key items during the = hurricane=20 season and incorporate what we learn from each storm as part = of our=20 future plan,=E2=80=9D says Mitch Herman, forecaster for = Associated=20 Growers.

Scheduling = systems

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According=20 to Verma, production scheduling helps determine whether = delivery=20 promises can be met and identifies time periods available = for=20 maintenance tasks. A production schedule gives shop floor = personnel=20 an explicit statement on what should be done so that = supervisors and=20 managers can measure their performance. It helps to minimize = WIP=20 inventory and the average flow time through the=20 system.
Scheduling software helps managers get = manufacturing =20 to produce according to projection forecasts. = Production=20 scheduling, according to Jamison, can be performed across = the full=20 spectrum of industry offerings; that is, via pull mechanisms = on one=20 end and finite and constraint-based production schedulers on = the=20 other. Scheduling systems should also support mixed-mode = execution,=20 which covers co- and by-products, batch bills of materials = (BOMs)=20 and routings. = A=20 scheduling system, says Jamison, should also support the=20 introduction of recipe ingredients at any point in=20 production.
While scheduling software is usually = considered an=20 ERP or business module, =E2=80=9CDon=E2=80=99t ignore the = shop floor,=E2=80=9D warns Greg=20 Schmidt, Rockwell Automation MES business development = manager. =E2=80=9CWhen=20 choosing a scheduling system, food processors should = carefully=20 define all the =E2=80=9Cconstraints=E2=80=9D on the plant = floor that could have an=20 impact on production.=E2=80=9DAccording=20 to Logility VP of Marketing, Karin Bursa, =E2=80=9Ca = constraint-based=20 production planning and scheduling solution is necessary to = predict=20 and minimize the impacts of equipment, material constraints = and=20 changeovers to maximize existing manufacturing = capacity.=E2=80=9D
Schmidt=20 says many processors limit their scheduling capabilities to = a=20 solution that spans their supply chain. =E2=80=9CWhile an = ERP system=E2=80=99s=20 scheduling module can provide supply chain scheduling = demands, it is=20 limited in its visibility into the management of production=20 schedules.=E2=80=9D Schmidt contends that a MES finite = capacity scheduler=20 can take into account production constraints and current = plant-floor=20 status, which help manufacturers proactively plan production = rather=20 than only react to = it.

Tools for the food = industry=20

Enlarge this = picture

Process planning software supports = short-, mid- and long-term planning and provides CIM and MES = functionality plus automated data capture. Source: CSB System = International. "=20 = src=3D"http://www.foodengineeringmag.com/FE/Home/Images/CSB-Intl%20small.= jpg"=20 align=3Dleft = border=3D0>

Process=20 planning software supports short-, mid- and = long-term=20 planning and provides CIM and MES functionality = plus=20 automated data capture. Source: CSB System=20 = International.

Whether=20 choosing an ERP or MES solution, consider an integrated = forecasting=20 and scheduling system that is keyed to the food industry. = Joel M.=20 Bartolome, IT manager at Guida Dairy, selected an integrated = suite=20 of forecasting and planning applications that met the = Dairy=E2=80=99s=20 requirements out of the box. =E2=80=9CEven if you have a = non-food and=20 beverage ERP system, getting industry-specific planning = tools is=20 critical as they should already have the ability to meet the = kind of=20 business processes you operate.=E2=80=9D =E2=80=9CBecause = we bought [CDC=20 Software=E2=80=99s Ross ERP] solution, we had no need for = any=20 customization=E2=80=94which cuts the implementation time as = well as reducing=20 implementation costs and maintenance issues.=E2=80=9DBesides=20 integrating well, scheduling tools should conform to the = special=20 needs of the food industry. According to Evan Garber, = president of=20 Escape Velocity Systems, food manufacturers should plan for = issues=20 such as lot expiration, scheduling priority (e.g., producing = non-allergen products before products with allergens), item=20 substitution options and machine constraints=E2=80=94such as = Product A can=20 run on blender 1 or 2, but not 3. Meetesh Shah, CIO = of Harris=20 Tea, discovered that the integration of a specialized shop = floor=20 system lets his company trace down to lot numbers. The Sage = MAS 500=20 system also has a level of simplicity that makes it easy to = use.=20 =E2=80=9CMany of the larger systems made users go through = several screens to=20 complete a single transaction. Ease of use, easy maintenance = and a=20 short learning curve are all major factors when your = operations are=20 as large and complicated as ours,=E2=80=9D says=20 Shah.

Do the homework =

Shopping=20 for forecasting and scheduling software is not a slam-dunk,=20 especially since there are so many suppliers and options = available.=20 Tasty Baking=E2=80=99s Bayles suggests keeping the process = simple and=20 thinking about the processes that need to be automated or = changed.=20
=E2=80=9CInvestigate alternatives, visit sites that have = a system (or=20 the system you are looking at) and understand what it can do = for=20 you,=E2=80=9D adds Peter Migchels, director of engineering = at Maple Leaf=20 Foods. =E2=80=9CGet performance guarantees from the = supplier. Ensure you=20 know what you are buying and why!=E2=80=9D
For food = processors without=20 forecasting or scheduling systems, GE Fanuc=E2=80=99s = Brandon Henning,=20 global industry leader (food & beverage) recommends = starting=20 with an ERP-level production planning and scheduling system = that=20 examines business trends, customer demands and market = influencers.=20 These insights will help processors decide when to run = specific=20 products and how much raw material and finished product = inventory is=20 needed to meet sales demand. From this point, Henning = recommends=20 growing the systems to implement automated execution = schedules that=20 can achieve greater visibility into the right product mixes = for=20 specific plants and lines, allowing for further enhancement = and cost=20 savings in just-in-time production.

Rebecca=20 Gill, vice president of Technology Group International, = suggests=20 that processors decide on the =E2=80=9Cpain points=E2=80=9D = driving new software=20 before looking for a specific package. Many companies start = with a=20 major pain point such as forecasting only to realize they=20 desperately need other functionality such as customer = relationship=20 management (CRM) and better financials. They end up = rescaling their=20 project midway through=E2=80=94or worse=E2=80=94buying the = wrong package. A full=20 needs assessment prior to project kick-off must be done to = assure=20 success.

Software has = limitations=20

Don=E2=80=99t=20 expect to find a software package that can solve all of your = problems, says Rory Granros, Infor director of industry and = product=20 marketing for the process industries. Customers want an ROI = that can=20 be measured quantitatively, but processors are not always = focused=20 internally. Different departments want varying results from = the=20 software but they haven=E2=80=99t worked together to = determine the company=E2=80=99s=20 needs. Many facilities run separate scheduling systems in = each area=20 of production, making it nearly impossible for a master = planner to=20 have visibility. Therefore, Granros recommends focusing on = one area,=20 then incrementally applying and upgrading the software in = other=20 areas.
The=20 ability to upgrade incrementally can be an issue for large=20 processors such as Pilgrim=E2=80=99s Pride. At = Pilgrim=E2=80=99s Pride VP planning,=20 Mike Fisk, advises that software must be able to grow as the = procesor grows. With the recent acquisition of Gold Kist, = Pilgrim=E2=80=99s=20 earlier forecasting package couldn=E2=80=99t keep up with = the number of=20 additional records and iterations the software had to = process plus=20 the increased number of plant locations and production = lines. The=20 solution was an ERP-based forecasting product capable of = handling=20 the operations=E2=80=99 increased size.
A lot of users = put high=20 expectations on a forecasting system because they = don=E2=80=99t approach=20 forecasting with full understanding, says Patrick Pilz, CEO = of=20 CSB-System International. There are two issues that need to = be=20 addressed to get a reliable forecast. First, Pilz points = out, =E2=80=9CA=20 forecast gets more reliable if you get closer to the point = of=20 primary consumption.=E2=80=9D For example, a forecast based = on point of sale=20 consumption is probably 80% more accurate than a forecast = based on a=20 processor=E2=80=99s sales. This, says Pilz, is what makes = Wal-Mart=E2=80=99s supply=20 chain so incredibly effective. Second, Pilz says the closer = the=20 forecast timeline is related to the actual consumption = timeline, the=20 more accurate the forecast becomes. For example, a forecast = for next=20 week might be as good as 95% accurate, for next month this = drops to=20 85%, and the next quarter may be down to 70% accuracy. = Pilz=E2=80=99s=20 advice: Concentrate 100% on the data you really need to = drive your=20 business and don=E2=80=99t waste too much time on = unpredictable forecasts.=20
A=20 taller order, according to Fisk, is the ability to deal with = new=20 product introductions and test products that really = aren=E2=80=99t=20 =E2=80=9Cproducts=E2=80=9D yet=E2=80=94products that = aren=E2=80=99t yet completely in the system.=20 Forecasting and scheduling systems should be flexible to = provide=20 producers with =E2=80=9Cwhat-if=E2=80=9D models and reports = as they design new=20 products and test the marketplace. Unfortunately, Fisk = contends, too=20 many packages today don=E2=80=99t place enough emphasis on = reporting such as=20 a =E2=80=9Cforecast vs. actual=E2=80=9D report. And in some = cases, reports are only=20 available by feeding this data into a separate reporting=20 package.
Lots of issues unique to the food industry make = the=20 choice of forecasting and scheduling software tricky, but = these=20 products yield results that can save money, says Gill. A = good=20 planning system can help food processors with expiration = dates for=20 raw materials and ensure that they receive the materials = when they=20 need them and in the right quantities. Allergens and = organics can be=20 better managed. A good ERP system can handle formula = management in=20 real time. In addition, an ERP system should easily be able = to=20 handle private labeling and multiple packaging=20 sizes.

Can=E2=80=99t control = the weather=20

Weather=20 is a force that can=E2=80=99t be controlled, but Guida = Dairy=E2=80=99s Bartolome=20 recommends getting the best long-term forecasts possible for = production needs in advance. He suggests that a true = statistical=20 forecasting system with modern inventory policy capabilities = should=20 take forecast error and variability into account and = recommend a=20 level of safety stock to hold based on the level of customer = service=20 needed. So even though there may not be as many cherries = from a=20 certain locale because the blooms appeared in winter and = froze,=20 there may be other sources of cherries. According=20 to Bartolome, if raw materials are susceptible to weather, = food=20 manufacturers take defensive measures=E2=80=94perhaps = purchasing and=20 stocking/processing materials ahead of time. Or at the first = signs=20 of, say, a cherry shortage, the producer should look for = alternative=20 suppliers or use a non-fresh substitute. Another viable = strategy is=20 to reduce demand for cherry products with other similar = fruit jam by=20 running promotions until adequate cherry supplies are back = on the=20 market.
Forecasting and scheduling = software=E2=80=94whether ERP or shop=20 floor level=E2=80=94should be integrated across the complete = supply chain,=20 says Jamison. The software must support the modeling of = process=20 variables (e.g., yield, scrap, potency and grade) and = tracking and=20 tracing of all lots. Processors will want the software to = capture=20 the quality attributes of their product and production = process,=20 produce a certificate of analysis and support FDA regulatory = compliance. In addition to shelf life and expiration = deadlines, the=20 software should support foreign languages, currencies, units = of=20 measure and landed costs and customs. = But keep in=20 mind, as Schmidt points out, forecasting and scheduling = software=20 must react to real-time issues on the shop floor as well. =

For=20 more information:
Karin Bursa, Logility, 404-238-8338, kbursa@logility.com
Scot=20 McLeod, CDC Software, 678-259-8625, scotmcleod@cdcsoftware.com=
Brandon=20 Henning, GE Fanuc, 434-978-6139, brandon.henning@ge.com
Nite= sh=20 Verma, Batchmaster, nverma@batchmaster.com
Patr= ick=20 Pilz, CSB-System Int=E2=80=99l., 619-640-0436 (x203), pilz@csb.com
Rebecca = Gill,=20 Technology Group Int=E2=80=99l., 800-837-0028, rgill@tgiltd.com
Greg O=E2=80=99 = Neal,=20 Junction Systems Inc., 770-443-2768, goneal@junctionsolutions.com=
Daniel=20 Oh, Sage Software, 949-790-2041, daniel.oh@sage.com
Todd=20 Jamison, Oracle, 303-334-1810, todd.jamison@oracle.com
Ev= an=20 Garber, Escape Velocity Systems, 303-494-1765 (x114), egarber@evs-sw.com
Rory=20 Granros, Infor, 800-260-2640, inforinfo@infor.com
Greg=20 Schmidt, Rockwell, 314-518-1054, gmschmidt@ra.rockwell.com

Forecasting/scheduling = software=20 considerations

The=20 following guidelines were suggested by Joel Bartolome, IT = manager at=20 Guida Dairy.

Decide = whether=20 forecasting or scheduling is the better investment in terms = of ROI=20 for your business. Usually, forecasting has a quicker = payback as it=20 underpins all of the other planning and scheduling = processes, and it=20 is generally less complex and quicker to implement. But it = does=20 depend on the business characteristics and also on what you = have=20 already tackled.
Look for suppliers with whom you are = comfortable=20 and have demonstrated success in your industry.
Define = your=20 essential requirements carefully. Choose a package that = meets your=20 needs but be wary of being sold overly complex solutions. = More is=20 not always better.
Define your key success criteria and = revisit=20 them during and after implementation to measure how well you = are=20 doing against your targets.
Define and implement the = business=20 process so everyone is clear of their roles and = responsibilities.=20
Provide adequate training so end users are comfortable = with the=20 system.
Use a piloting approach involving the end = users. This helps keep = the project=20 on track and provides great hands-on experience early in the = implementation.
Do not be too ambitious too quickly. Get = some=20 quick wins early in the project. Build on these in later=20 stages.

Tasty Baking=E2=80=99s = Success Story to be=20 Featured at Food Automation Conference

Autumn=20 Bayles, senior vice president of strategic operations and = technology=20 at Tasty Baking Company, will explain the implementation of = a new=20 plant scheduling and ERP system at Food = Engineering=E2=80=99s Food=20 Automation and Manufacturing Conference and Expo 2007 = scheduled for=20 April 15-18 in Orlando.
Tasty Baking had seen a drop in = operating=20 margin from 7.9% in 2000 to 4.9% in 2002. With a new CEO and = management team poised to turn the operation around, a new = plant=20 scheduling and ERP system was seen as way to lower finished = goods=20 inventories and decrease returns. The new system = provides a=20 better connection between production and demand by = considering=20 current and future inventories before manufacturing is = planned. The=20 installed SAP system has increased order fill rates by 2%, = reduced=20 returns 4% and cut days in inventory by 10%.
For more = information=20 on the conference visit =20 www.bnpevents.com/FE/FAM/.<= /FONT>