DemandCaster analytics are designed to help users focus on the most important items so that appropriate planning and stocking policies may be applied. This article describes the organization of the DemandCaster analytic processes.
The Importance of Segmentation
Segmentation is a key principle behind inventory management. It is based on the premise that not all items are alike and that the goal is to not have a 100% fill rate on every item carried.
The analytics are built with a logical sequential work flow as described below and organized in the Analytics menu group:
- The Classification analytic sets the Business Importance (BI) by item and location (if applicable). The BI ranking is based on revenue, cost, and margin contribution of an item over the last 52 weeks and is set in the control panel. The Classification analytic also calculates the forecastability metric.
- The Segmentation analytic sets the Order Frequency (OF), Accuracy (A), and also calculates the stock-out performance by item and location (if applicable). Order Frequency calculates the ranking of an item based on how many customer order line items have been created for the item over the last 52 weeks.
- The Lead Time analytic calculates the actual versus stated (planned) lead time by item and location (if applicable). Lead time is the typical number of calendar days to expect an item to arrive at a location from order to receipt. Correct lead times are necessary to ensure proper order point calculations.
- The calculated BI and OF are then used to assign order periods and other replenishment logic for ordering and inventory management. Thereafter the Stocking analytic is run for recommendations on what should be stocked and maintained in inventory versus not stocked and made or purchase to order.
- The Forecast analytic provides the detail of the forecast source including statistical measures.
- The Stocking analytic and Lead Time analytic drives the Order Point Calc which calculates the safety stocks and order points for those items that are stocked.
- On a periodic basis (monthly is recommended) the Order Point Review analytic is reviewed to assess actual to plan performance among other metrics to assess if any of the set parameters need to modified. This could mean changes to lead times, forecasts, stock versus not stock among other variables.
All these analytics may be automated to run on a periodic basis using DemandCaster's Automation process.