THE ROLE OF DEMAND PLANNING IN IMPORT SUPPLY CHAINS THE MERCADO INSTITUTE OF INTERNATIONAL TRADE NOVEMBER 6, 2019
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
3proprietary + confidential © Mercado 2020
• 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)
4proprietary + confidential © Mercado 2020
• 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
5proprietary + confidential © Mercado 2020
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
6proprietary + confidential © Mercado 2020
BRING ORDER TO YOUR IMPORTS
Affordable. Easy to Implement. Easy to Use.
MERCADO PLATFORM -
PLAN SELLBUY MOVE
Order Planning Systems
Demand Planning
Systems (DPS)
Enterprise Resource
Planning (ERP)
Demand Fulfillment Systems
Warehouse
Management
Systems (WMS)
Enterprise Resource
Planning (ERP)
Networked Supply Chain!
Mercado - Order Management System
7proprietary + confidential © Mercado 2020
• 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
8proprietary + confidential © Mercado 2020
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
9proprietary + confidential © Mercado 2020
• “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
10proprietary + confidential © Mercado 2020
• “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
11proprietary + confidential © Mercado 2020
• 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
12proprietary + confidential © Mercado 2020
MANUFACTURING PLANNING &
CONTROL IS OUTSOURCED
TO THE SUPPLIER
THE MAIN CHALLENGE OF OUTSOURCED PRODUCTION:
DE-COUPLING OF BUY SIDE & SELL SIDE FUNCTIONS
13proprietary + confidential © Mercado 2020
• 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
14proprietary + confidential © Mercado 2020
DEMAND PLANNING & IMPORT ACTIVIT IES IN AN
OMNI -CHANNEL/OUTSOURCED PRODUCTION MODEL
15proprietary + confidential © Mercado 2020
DEMAND MANAGEMENT:
A MORE DETAILED BREAK DOWN
16proprietary + confidential © Mercado 2020
• 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
17proprietary + confidential © Mercado 2020
• 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
18proprietary + confidential © Mercado 2020
• 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
19proprietary + confidential © Mercado 2020
• 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
20proprietary + confidential © Mercado 2020
• 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
21proprietary + confidential © Mercado 2020
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
22proprietary + confidential © Mercado 2020
• 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
23proprietary + confidential © Mercado 2020
• 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
24proprietary + confidential © Mercado 2020
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
25proprietary + confidential © Mercado 2020
• 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)
26proprietary + confidential © Mercado 2020
Affordable. Easy to Implement. Easy to Use.
MERCADO PLATFORM -
PLAN SELLBUY MOVE
Order Planning Systems
Demand Planning
Systems (DPS)
Enterprise Resource
Planning (ERP)
Demand Fulfillment Systems
Warehouse
Management
Systems (WMS)
Enterprise Resource
Planning (ERP)
Networked Supply Chain!
Mercado - Order Management System
TYING IT ALL TOGETHER WITH S&OP
27proprietary + confidential © Mercado 2020
• Website: mercadolabs.com
• Derek Siler, Inside Sales & Customer Support
– 817.403.5923
THANK YOU!