Category Archives: Technology

SYSPRO: Forecasting and Inventory Optimization for Small & Mid-Sized Businesses, Part I

SYSPRO is an established ERP suite provider (that has been around for over 30 years) that also provides Forecasting, Inventory Optimization, and Warehouse Management solutions in addition to the 40+ other modules that it provides. The Inventory Optimization solution (in SYSPRO 6.1) is one of their newest offerings. It’s built on top of their solid forecasting module and provides SMBs with a good inventory management and optimization solution, especially if they are already running SYSPRO.

While SYSPRO (a Microsoft Gold Certified Partner) isn’t an Oracle or SAP, they are a fairly significant company in the mid-market with over 14K customers in 60 countries that contribute to their 300M footprint. Furthermore, their solution is built on top of the Microsoft .Net platform, integrated with the Microsoft Office suite, and easy to pick up by anyone who is familiar with Microsoft Small Business Products. In particular, if you can use Microsoft Project, you can use their products. This is an appropriate technology stack (and strategy) for most of their target market who are already using Windows and Microsoft (Back Office) Products as it minimizes the new-user learning curve.

Their forecasting solution is quite robust. (For a discussion of forecasting, see the glossary page, which also contains links to some relevant posts.) It allows you to forecast at the individual SKU level and at the product family level, which generally creates more robust long-term forecasts. The forecasting solution can take into account historical data, projected sales, promotions, current stock levels, target stock levels (by location), lead times, and policies and create a (monthly, weekly, or daily) forecast using a variety of algorithms. You can select your preferred algorithm, or let the program choose the algorithm that is the best fit given historical data patterns. The program tracks the current forecast, the draft forecast (revision) under consideration, and the suggested forecast created from the last modelling session, which you can manually alter or revise to create a new draft forecast, which will become the new forecast once approved by an administrator.

The algorithms at your disposal include competition, Holt-Winters additive, Holt-Winters multiplicative, annual seasonal profiles (smoothed and unsmoothed), mean, median, moving average, exponential smoothing (with or without trending), multi-period weighted average (six, twelve, etc.), and a few others. (A good overview of these forecasting models can be found on resample.com.) In each case, the system will generate a forecast and graphically plot it against sales for the last three relevant periods (e.g. if you were forecasting Jan to Dec 2010, it would plot Jan to Dec 2007, Jan to Dec 2008, and Jan to Dec 2009, if available), the current forecast, and the current draft forecast so that you can visually see whether the forecast is in line with historical behavior and what is currently expected. This allows you to quickly spot whether a trend might be out of whack or whether (or not) the revised forecast produces spikes in line with upcoming promotions.

The system will also generate all of the relevant statistical data, including the cumulative forecast error, mean absolute deviation, mean square deviation, mean absolute % error, and tracking signal so that you can check the calculations and understand how much confidence you should have in the result. For each algorithm, it will also allow you to alter any of the controlling parameters (and re-run the forecast at any time). (But you should only do this if you are well versed in the art of forecasting and know what you are doing. However, if you are an expert, it’s great to have all this power to run multiple what-ifs and understand the ripple effects minor deviations in sales trends have on your forecasts, which in turn can effect your optimal inventory strategy.) And, as I noted above, you can do this forecasting at the group / product family level or the individual SKU level. This allows you to quickly generate a robust group forecast and then dive in and alter only those individual SKU forecasts that need to be tweaked to take into account upcoming promotions or new seasonal trends. In addition, you can also restrict the group forecast to any meaningful combination of warehouses, stock codes, suppliers, and product classes — which gives you a lot of power and flexibility in forecast creation. And the more advanced users can set up batch forecasting runs, forecast-over-forecast comparisons, and even Pareto analyses, but this takes us into the realm of inventory optimization, which is the subject of Part II.

In other words, the SYSPRO forecasting module packs a lot of power into a relatively easy to use SMB software solution. And with SYSPRO 6.1, you now get a true Inventory Optimization Solution!

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Is China the Home of the New Cyber Criminal?

A year ago we had GhostNet, a massive cyber espionage network rooted in China that went well beyond simple allegations of spying on Tibetan Institutions. After a 10-month investigation, a network of over 1,295 infected hosts in 103 countries was discovered that included computers at ministries of foreign affairs, international organizations, news media, and NGOs.

Then we had massive cyber attacks that originated in China, including one against Google last December, and now even Google is pulling out of the country (as it must do no evil).

And now, we find out that GhostNet was but a shadow of a much larger Shadow Network (The Globe and Mail) which has compromised sensitive data from at least 16 countries from compromised computers in at least 31 countries (including computers used at Honeywell and NYU), which have been used to gleam Indian missile defence secrets and Canadian Visa applications from its citizens travelling abroad (including applications from the UK). The full findings will be revealed today in Toronto, as the network was cracked by researchers at the University of Toronto’s Munk Centre for International Studies, the Ottawa-based security firm SecDev Group, and a U.S. cyber sleuthing organization known as the ShadowServer Foundation, the real-world Internet Lone Gunmen.

The Full Report is available on line on Scribd and documents how much of India’s defence network has compromised as the computers and systems of the National Security Council Secretariat, Military Engineer Services, Military Personnel (including the Artillery Brigade and the Air Force), Military Educational Institutions (including Army Institute of Technology, the Military College of Electronics, and the Mechanical Engineering College), India Strategic Defence and Force magazines, a number of corporations (including YKK India Private Limited, DLF Limited, and TATA), and Maritime India (including the National Maritime Foundation and the Gujarat Chemical Port Terminal Company Limited) were all breached.

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The Basics of Inventory Management, Courtesy of SYSPRO

As a precursor to my future post on SYSPRO’s new Inventory Optimization solution, I thought I’d provide a brief review of their free e-book on Supply Chain, Inventory Management, & Optimization: Skills for Small Businesses, available on request to clients and prospects. While it doesn’t delve deep into inventory (and related supply chain) optimization, it does a great job describing the basics of inventory management and serves as a great introduction to the subject to small and mid-size businesses just beginning to tackle the issue.

When beginning to delve into the issue of inventory management, there are five factors that need to be considered: production, stock, location, transport, and information requirements. Associated with each factor are a number of decisions that need to be made, which are summarized in the following table:

Production capacity

flexibility

facilities

SKU vs Job Lot vs. Cross-Docking
Stock basic vs seasonal vs safety

level

variety

Location supplier proximity

customer proximity

Transportation mode

frequency

flexibility

Information collection

distribution

More specifically,

  • should you centralize production, and increase shipment times to remote locations, or decentralize production and minimize shipment times to any particular customer location?
  • should you maintain high levels of stock to prevent a stock-out, or implement flexible manufacturing and JIT delivery?
  • should you organize inventory by SKU, by Job Lot, or implement Cross-Docking?
  • how does seasonality affect your safety stock levels?
  • ship, rail, truck, air, cableway, pipeline, conveyor, or wire?
  • should you centralize your warehouses, or distribute them?
  • should you implement POS or rely on traditional back-room systems?

The goal is to balance trade-offs to maximize agility, adaptability, and alignment in your supply chain which balances customer service levels and internal operating efficiencies to make sure that you can provide your customers with the right goods, at the right price, at the right time.

As such, you need to be concerned with stock assortment, level, turnover, and associated costs. More specifically, what is the right mix of product at any particular time to maximize turnover and minimize associated costs? Then, you have to acquire the inventory, within working capital constraints, and track real-time utilization to improve future forecasts. This should all be done in accordance with comprehensive inventory management policies, which should be designed to quickly identify and eliminate overstock (before the product spoils or becomes obsolete) and replenish popular items in a timely fashion. These policies can use one or more inventory control methods, which can be manual (like ticker, click, and stub) or automatic (like pos terminals).

And once you’ve got the basics of inventory management down, you can move on to inventory optimization.

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It Doesn’t Matter How Strategic The IT Vendor Is …

It matters how strategic the solution they offer is! I shouldn’t have to point this out, but after encountering a recent article in Intelligent Enterprise on “the 10 most strategic IT vendors” which basically just tooted the horn of the usual suspects (IBM, SAP, Microsoft, Oracle, Cisco, HP, Teradata, VMWare, and EMC), I feel that I have to because most of their primary offerings — namely operating systems, hardware, networking products, and virtualization software — are not strategic to your business at all! Even relational databases and ERPs on their own are not strategic anymore. Everyone and their dog has a database these days, and ERP is open source software now (think Compiere). You can even get a professionally managed solution with unlimited records in the cloud for as little as €99 a month from providers like Erply.

And just because no one ever got fired for buying IBM, it doesn’t mean it was the right decision. The value isn’t in the name, it’s in the solution that is being delivered and the returns you are able to generate. If SAP or Oracle was everything you need, why would Ariba, BravoSolution, CombineNet, DecideWare, Emptoris, FieldGlass, Global Data Mining, Hiperos, Iasta, JDA, and hundreds of other companies have successful businesses when they all have solution offerings that are fundamentally based on the analysis of transactional data stored in relational databases? Because the “strategic” is in the advanced analysis that the big-name vendors offering old-school solutions don’t have yet!

So don’t get suckered by the name or the market size. What’s important is what the solution can do for you and whether or not the vendor is financially stable and will be around to support you on it. If the ROI is there and the vendor’s not going anywhere, you go for it. Simple as that!

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Algorhythm: Still Pounding Out the Optimization Rhythm on the Tabla (Part II)

In Part I, we re-introduced you to Algorhythm, purveyors of a supply chain optimization rhythm solution platform out of Pune. In the day before yesterday’s post, we discussed their new Inventory Planning Module, inventrhythm, and indicated how it allows you to take your entire distribution network design into account, which is necessary if you truly want to minimize your inventory costs. Then we told you that if you were truly serious about getting the most bang for you inventory dollar, you had to go beyond inventory and also consider your underlying distribution network design, as it ultimately dictates how much your inventory is going to cost you. Just like a bad product design will lock in expensive commodity and engineering costs before it is sourced, a bad network design will mandate higher safety stocks and sub-optimal transportation methods, which will in turn lead to higher carrying and transportation costs. Thus, to truly optimize your inventory, you also have to simultaneously optimize your distribution network to the extent that you are able to do so.

With Algorhythm’s new Strategic Distribution Network Optimizer, which seamlessly integrates their netrhythm supply chain network design module with their new inventrhythm multi-echelon inventory optimization solution, you can simultaneously optimize your facility location, transportation methods, and inventory levels to achieve your end-customer service levels while minimizing your overall inventory-related supply chain costs.

Algorhythm’s netrhythm solution allows you to define the warehouses that are available to you at each level of your network (and to define the warehouses that must be used, or must not be used, in the solution) in addition to source factors and end customer locations; the transportation methods available; the transportation providers available (as well as any that must be used, or must be used, and minimum or maximum business levels); fixed, minimum and/or maximum lot sizes; available lanes, forecasted demand; target inventory levels; and network constraints (with respect to linkages, warehouses, product mix, mode, etc.) and produces a lowest cost distribution network design subject to your constraints that will achieve your target service levels at each location. In other words, it’s a very powerful network design model that lets you take all of the relevant components in your physical network.

But the integrated solution is even more powerful. In addition to the many layers of your distribution network, transportation modes, and logistics providers, you can specify detailed service targets by location, SKU, and period. You don’t have to use average demand levels — you can take into account your detailed forecasts by month, week, and even day. You can model all of your inventory related costs at different demand levels; segment inventory by SKU subgroup, group, and category; and analyze by cluster and channel. You can look at your various cycle times, load factors, and flow options and do so with respect to all of your network and inventory constraints (such as capacity and existing agreements) and cost components (fixed and variable). For example, you can take into account fixed truckload and variable less than truckload rates from a third party and compare that with fixed and variable costs of operating your own fleet (lease, maintenance, etc.). And when you’re done, you get the network design that minimizes your inventory levels and associated costs while ensuring that your service levels are met. The reports detail what inventory levels are needed where, when, and the replenishment cycles as well as what providers move the product, when, using what modes, and at what load factor. It’s a complete supply chain plan. Furthermore, it’s easy to work with because all the reports can be output to Excel — which allows you to drill and pivot to your heart’s content until you see the data in a form that’s most convenient for you to internalize. (And while spreadsheets are not supply chain solutions — especially where optimization and analysis is concerned, they are good for report manipulation, and everyone is already comfortable with them.)

And the results are beyond what you would get with either tool on its own because not only does your distribution network dictate your inventory costs, but changes in inventory requirements over time will dictate your network costs. (If a warehouse becomes unnecessary because customer locations move and new lanes open up, that’s a considerable fixed cost that is unnecessary.) It’s a viscous cycle, and unless you look at both in unison on a regular basis, you’re missing cost reduction opportunities. Consider the case study of a major (FM)CG company in India that typically maintained about 115 tonnes of inventory in its network in an attempt to meet service levels. Not only did every tonne of inventory, depending on the SKUs in question, represent anywhere between roughly ten thousand and a few million dollars of working capital tied up in inventory, but every tonne represented additional inventory costs that chipped away at margin and profit. When Algorhythm applied their basic SKU inventory model, they were able to present the CG company with a solution that trimmed 25 tonnes of inventory out of the system without affecting service levels. (In fact, the average service level was increased!) When they moved to a multi-echelon inventory model, which balanced inventory not just at each level, but across levels (and allowed inter-level shipments as well), they were able to trim an additional 26 tonnes of inventory. But when they applied the full Strategic Distribution Network Optimization model, they were able to shave an additional 5 million tonnes. In the end, they more than halved the required amount of inventory to meet the service levels, and halved the network related costs. That’s a very considerable chunk of change that went straight to the bottom line!

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