Core Planning Improvement Project

To improve core serviceability and core planning process and suggesting input parameters for implementation on SAP

Core Plannig Improvement Project

CONTENTS Objective of Research Project Introduction Analysis of Sales and Serviceability Findings Suggestions Implementation Conclusion Limitation and Future scope

Objective: To analyze core serviceability of Arvind Life Style Brands and to

determine the reason of lack in serviceability To modify core planning process using statistical tools and to

find out the input parameters required to implement core planning on SAP

Core planningSegregation of core products

(once in 6 months)

Order confirmation to

market

Sending information to sourcing dept

Order review Order consolidation

Product displayBase stockcalculation

CONTENTS Objective of Research Project Introduction Analysis of Sales and Serviceability Findings Suggestions Implementation Conclusion Limitation and Future scope

Sales analysisSales (Quantity wise) Jan 2011 - Dec 2011

Sales (Value wise) Jan 2011 - Dec 2011

1%

64%

1%

24%

10%

Blazers ShirtsSuits TrousersT-Shirts

6%

55%

8%

25%

6%

Blazers Shirts SuitsTrousers T-Shirts

Analysis of sales: Month wise

0

20000

40000

60000

80000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Jan 2011 - Dec 2011, Sales (Qty)

Sales (Qty)

Analysis of serviceability: Month wise

60% 69% 76%53%

73% 67%

35%59% 60% 52%

63%74%

61%

Analysis of serviceability: month wise% Serviceability

Analysis of Serviceability: Month wise analysis for each category

85%

78%

59%

73%

38%

87%

53%

70%

76%

53%

73%

66%

80%

71%

87%

39%

43%

61%

27%

60%

66%

40%

63%

63%

98%

71%

77%

82%

87%

76%

0% 20% 40% 60% 80% 100%

JAN

FEB

MAR

APR

MAY

JUN

BZ SH SU TR TS

12%

62%

51%

35%

68%

21%

52%

33%

60%

65%

59%

71%

76%

62%

80%

44%

85%

86%

84%

47%

66%

39%

43%

52%

46%

54%

76%

52%

48%

70%

45%

30%

49%

80%

64%

0% 20% 40% 60% 80% 100%

JUL

AUG

SEP

OCT

NOV

DEC

Total

BZ SH SU TR TS

CONTENTS Objective of Research Project Company profile Introduction Analysis of Sales and Serviceability Findings Suggestions Implementation Conclusion Limitation and Future scope

Main reasons identified for the low core serviceability

Low core serviceability

MAN MATERIAL

METHOD

Manual bin movement

Improper communication

Manual order

punching

Fabric delay

Planning process

High lead time

Improper forecasting

No base stock is maintained

Present method of planning Those style codes, whose total sale is more than 200 pieces,

throughout the year are considered as core products No base stock or safety stock is maintained; it creates more

stock out condition

Stoc

k on

han

d

Time

If demand increases….

Actual demand

Stock out

Present method of planning PR is generated in every 6 months Production planning is done only for next season; current

season and additional orders are not considered For next season also, PR for all the orders is generated

altogether, whereas different channel require different quantity at different point of time. For eg. KAC like shoppers’ stop take 60% of the order quantity in 1st hit and rest 40% in 2nd hit.

CONTENTS Objective of Research Project Company profile Introduction Analysis of Sales and Serviceability Findings Suggestions Implementation Conclusion Limitation and Future scope

1. Segregation of core products ABC analysis or Pareto analysis should be used Should be carried out before Road show and I-summit Secondary sales should be taken for consignment channel and

sell through should be calculated Pareto should be done on the consolidated sales of billing

channel and secondary channel Final call should be taken on the basis of Total sales, Sell through in consignment channel, Forecasted

sales for EBO Format for core segregation

2. Base stock calculation The method used for calculating safety stock is the

statistical model of Standard Deviations of a Normal Distribution of numbers to determine probability

To identify time period for which base stock should be maintained

0

10000

20000

30000

40000

50000

60000Average

sales

1ST QUT2ND QUT3RD QUT4TH QUT

Input parameters and formulae required to calculate Safety stock and Reorder point Safety stock = (standard deviation) * (service factor) *

(lead-time factor) * (order cycle factor) Reorder Point = Lead Time Demand + Safety Stock Forecast period = 90 days Order cycle = 30 days Service level taken is 90%

CATEGORY LEAD TIME

Suits and Blazers 60 days

Shirts and Trousers 30 days

T-shirts 45 days

Service factor =NORMSINV(0.9) Lead time factor = SQRT(LEAD TIME/90) Order cycle factor = SQRT(90/30) Lead Time Demand = AVERAGE(FORECASTED

SALES)*(LEAD TIME/30) Forecasted sale should be taken for 3 -3 months, considering

all the channels (consignment + billing) It is taken at SKU level Standard deviation = STDEV(FORECASTED SALES) Safety stock = (standard deviation)*(service factor)*(lead-

time factor)*(order cycle factor) Format for calculating Safety stock

Proposed Inventory Control Model

INVENTORY LEVEL

TIME

MAX

MIN

Safety Stock

Working QuantityWorking Quantity

Lead Time Receipt of Material

Reorder Point

Increase in demand

Delay in Delivery

No stock out

3. Modified core planning

Today’s date

End of this season/ Start of next season

End of next season

This season (remaining) projected sale + additional order

Base stock + next season projected sale

How much to produce is calculated as Next season opening stock + this season

(remaining) projected sale – stock as on today’s date Stock as on today’s date will be calculated with: Warehouse (all bins) EBO (Doors) Project Gold (PG)- Distribution KA (Doors)

This season (remaining) projected sale and additional orders will be calculated with: EBO Project Gold (PG)- Distribution KA Additional orders (Monthly)

Next season opening stock will be calculated with: Base stock: Project Gold (8 weeks) EBO (16 weeks; calculated and given by retail team) KA Consignment (Central + Globus)- 14 weeks

Next season projection: Project Gold EBO KA Consignment (Central + Globus) KO (Shoppers’ Stop, Lifestyle, West-Side) Billing channels (Others)

The final formulae will be: Order for production = Base stock (for PG, EBO, KAC) + 60% of next season’s

projected sale (for PG, EBO, KAC) + 100% order from KO (Shoppers’ Stop, Lifestyle, West-Side) + 100% order from other billing channels (MBO & Other) + Current season projected sale (for PG, EBO, KAC) + Additional orders (Monthly) –WIP (in production) –WH stock – EB (Doors) stock – PG stock – KA (Doors)

Format of core planning

4. Core Phase out Model

order

Fabric sourcing

productionRetail outlet

Customer demand

Warehouse

6th

check3rd

check

5. Proposed Time and action calendarFALL WINTER/ AUTUMN WINTER SEASON: SEP TO FEB

SPRING SUMMER SEASON: MAR TO AUG

TIME PERIOD

FW

TIME PERIOD

SS

TASK TO BE COMPLETED

2nd & 3rd WEEK OF DEC 2nd & 3rd WEEK OF JUNAsk last year sales data for core segregation process

4th WEEK OF DEC 4TH WEEK OF JUN Core segregation

1ST WEEK OF JAN 1ST WEEK OF JULI - summit, ask forecasted sales data from concerned

person2nd WEEK OF JAN 2nd WEEK OF JUL

3rd WEEK OF JAN 3rd WEEK OF JUL

4th WEEK OF JAN 4th WEEK OF JULBase stock calculation and updating for next quarter

TIME PERIOD

FW

TIME PERIOD

SSTASK TO BE

COMPLETED

1ST WEEK OF FEB 1ST WEEK OF AUGCore planning, i - summit

orders received, road show start

2nd WEEK OF FEB 2nd WEEK OF AUG Order release for production

3rd WEEK OF FEB 3rd WEEK OF AUG

4th WEEK OF FEB 4th WEEK OF AUG

MAR SEP Fresh stock sale

APR OCT Fresh stock sale

MAY NOV Fresh stock sale

JUN DEC Fresh stock sale

JUL JAN EOSS (End Of Season Sale)

AUG FEBEOSS, stock should be in

WH

CONTENTS Objective of Research Project Company profile Introduction Analysis of Sales and Serviceability Findings Suggestions Implementation Conclusion Limitation and Future scope

Implementation

Segregation of Core codes using Pareto Analysis

Base Stock calculation using Standard deviation formulae

Core planning, using modified format

Conclusion The core serviceability was found 61% for the year 2011The main reasons were: Core segregation is done on assumption basis No safety stock is used No statistical tools are used for core planning

Proposed solution/ suggestion Pareto analysis for core segregation Statistical model of standard deviations of a normal distribution

used to calculate safety stock Suggested modified format for core planning and found out the

parameters required to implement on SAP