Do I need to have stock before ordering? - This is a watershed moment for supply chain management
When a customer places an order, do I need to have inventory first? This is not a small problem, but a big problem in supply chain management. Specifically, if you require customers to have inventory before they can place orders, then the general idea of your supply chain management is to decide sales based on production. It is based on sales.
Why do you say that?
Set sales based on production: that is, what you produce, you sell. Production is based on sales, that is, I produce what you need. If there is inventory before placing an order, the basis for production can only be forecast. The prediction is extremely inaccurate. The monthly prediction accuracy rate according to the model generally does not exceed 50%. If the weekly prediction is used, the accuracy rate is only 30-40% on average. So most of what you produce is not what the market needs, or the timing is different from what the market needs. So you can only sell what you have in stock.
Many people still find it difficult to understand: even if production is based on forecasted demand, it is a forecast provided by sales, not a made-up forecast by ourselves. It seems that we have arranged production by ourselves, but we don’t bear it.
The essence of determining sales by production means that supply cannot change with market demand. Although demand forecasting is a prediction of market demand, it is not the real market demand, and there is still a big deviation from the actual demand, so it is still based on production. The problem is not whether the supply chain wants to determine sales based on production, but the company's The problem of logical design of the operation of the entire supply chain.
To determine production based on sales, the most critical change is to allow customers to place orders freely and order what they need. For supply chain operations, we are faced with uncertain demands every day, and the back-end must establish an operation system that adapts to the uncertainties every day, not only in the production link, but also in the supplier link. .
The traditional production-based sales plan is basically planned on a monthly basis. The daily production plan is basically broken down from the monthly plan to the day. The supplier's material supply and its own production operate according to this plan. Once the demand changes, the planning system can't adapt. If you want to adapt, you are also constantly inserting urgent orders, which completely disrupts the rhythm of production and supply and brings greater uncertainty.
Production based on sales: The basic implementation method is to increase the planning frequency and form rolling weekly plans and rolling daily plans. The planning frequency is high, and the supply is connected with the demand every day of the week. Do what you need, and produce what you need. , so the inventory is extremely low and the demand satisfaction rate is high. This connection between supply and demand occurs not only in the production process, but also in the entire supply system.
The consumer goods industry can achieve production-to-order, home appliances and fast-moving products, but it is not absolute production-to-order, but relatively production-to-order. For example, three-day orders are combined for production. This is a big step forward from forecasting production, and as long as it operates normally in this mode, the supply chain will be greatly improved.
Many people are skeptical about whether it is possible to achieve production based on sales, but we are actionists. We have designed a model based on sales, which changes every week and every day according to market demand changes. The test shows that the effect is very good. Inventory of finished products can be reduced by more than half, production can be balanced, and shortages will be significantly reduced, which will be fully implemented at the beginning of next month.
Why do you say that?
Set sales based on production: that is, what you produce, you sell. Production is based on sales, that is, I produce what you need. If there is inventory before placing an order, the basis for production can only be forecast. The prediction is extremely inaccurate. The monthly prediction accuracy rate according to the model generally does not exceed 50%. If the weekly prediction is used, the accuracy rate is only 30-40% on average. So most of what you produce is not what the market needs, or the timing is different from what the market needs. So you can only sell what you have in stock.
Many people still find it difficult to understand: even if production is based on forecasted demand, it is a forecast provided by sales, not a made-up forecast by ourselves. It seems that we have arranged production by ourselves, but we don’t bear it.
The essence of determining sales by production means that supply cannot change with market demand. Although demand forecasting is a prediction of market demand, it is not the real market demand, and there is still a big deviation from the actual demand, so it is still based on production. The problem is not whether the supply chain wants to determine sales based on production, but the company's The problem of logical design of the operation of the entire supply chain.
To determine production based on sales, the most critical change is to allow customers to place orders freely and order what they need. For supply chain operations, we are faced with uncertain demands every day, and the back-end must establish an operation system that adapts to the uncertainties every day, not only in the production link, but also in the supplier link. .
The traditional production-based sales plan is basically planned on a monthly basis. The daily production plan is basically broken down from the monthly plan to the day. The supplier's material supply and its own production operate according to this plan. Once the demand changes, the planning system can't adapt. If you want to adapt, you are also constantly inserting urgent orders, which completely disrupts the rhythm of production and supply and brings greater uncertainty.
Production based on sales: The basic implementation method is to increase the planning frequency and form rolling weekly plans and rolling daily plans. The planning frequency is high, and the supply is connected with the demand every day of the week. Do what you need, and produce what you need. , so the inventory is extremely low and the demand satisfaction rate is high. This connection between supply and demand occurs not only in the production process, but also in the entire supply system.
The consumer goods industry can achieve production-to-order, home appliances and fast-moving products, but it is not absolute production-to-order, but relatively production-to-order. For example, three-day orders are combined for production. This is a big step forward from forecasting production, and as long as it operates normally in this mode, the supply chain will be greatly improved.
Many people are skeptical about whether it is possible to achieve production based on sales, but we are actionists. We have designed a model based on sales, which changes every week and every day according to market demand changes. The test shows that the effect is very good. Inventory of finished products can be reduced by more than half, production can be balanced, and shortages will be significantly reduced, which will be fully implemented at the beginning of next month.
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