domingo, 10 de junio de 2018

Forecast bias

In this post we are going to touch on one of the most important KPIs that any demand planner should focus on: Forecast bias

Forecast bias is the general tendency for a forecast to be higher or lower than the actual value.

Forecast bias is distinct from forecast error in that a forecast can have any level of error and still be completely unbiased. For instance, even if a forecast is fifteen percent higher than the actual value half of the time and fifteen percent lower than the actual value the other half of the time it has no bias. If the forecast is on average fifteen percent higher than the actual value has both fifteen percent error and fifteen percent bias.

Bias can exist in statistical forecasting or in judgment methods. With statistical methods, the forecasting model must be adjusted or switched to a different model. For judgment methods however, bias can be conscious and driven by certain incentives provided to the forecaster or it can be unconscious.

How to simply calculate forecast bias at an aggregated level?

BIAS = Historical Forecast Units minus Actual Demand Units.

The impact of bias can mean that either an organization is holding too much inventory (over-forecast bias) or missing sales due to service issues (under-forecast bias).

domingo, 13 de mayo de 2018

The Internet of Things

A lot has been written already about the Internet of Things (IoT) and how it will affect nearly every business and industry; In my opinion, one of the most exciting areas of impact and disruption is the global Supply Chain.

One great example to illustrate this is this short clip from the TV show Portlandia, in this episode, two friends are dinning out and before ordering they insist on knowing as much as possible about the chicken they will be eating. They find out his name, what he was fed, his social habits etc. The process of assessing the chicken before agreeing to eat it might be a bit too bizarre, but with the IoT, this will become the norm. We will be able to experiment that type of transparency, and eventually it will be demanded by suppliers, customers and end consumers.

Among many other, some of the benefits that the IoT will bring are:

- Operational efficiency: The real-time visibility derived from the IoT enables information to be shared at every level allowing deficiencies to be identified quickly so that problems can be immediately rectified, or possibly even prevented altogether. Companies can see delays, slowdowns or trends that will affect the bottom line and inefficient processes that are costing them money can be identified and corrected

- Customer services: The IoT will dramatically reduce the amount of time from click to fulfillment. With customers demanding more and more information the IoT will fulfill up to the minute details on where their item is in transit and accurate alerts notifying them of delivery dates and times.

- Inventory management: The IoT will allow organizations to automatically know when products must be restocked or reordered, eliminating delays or inventory issues that would send customers to the competition.

Linked to this, loss management will greatly improve: with sensors tracking every movement, it will be almost impossible for merchandise to simply “disappear”, and if it does, it will be possible to know exactly where the incident happened and what factors may have contributed to merchandise loss.

Asset Tracking and in transit visibility: New RFID (we talked about RFID technology here) and GPS sensors can track products “from floor to store” and even beyond. At any point in time, manufacturers can use these sensors to gain granular data like the temperature at which an item was stored, how long it spent in cargo, and even how long it took to fly off the shelf.

With some many possibilities, challenges will also need to be considered:

- Need of many different technical elements to deploy the end-to-end IoT solutions: Network infrastructure, devices, applications, platforms, security solutions, and integration services.

- Security: All the information must be prevented from falling into the wrong hands, or hacked. Sensors should only send specific information, which must be held in a secure, private cloud environment. Here is where Blockchain technology (see more about Blockchain here) will play a definitive role.

Overall, with everything becoming much more internet-driven, IoT in the supply chain is still only in its infancy, but sure to take off, exciting times lie ahead!

domingo, 25 de marzo de 2018

Blockchain for supply chain

Traceability is one of the most important foundations of logistics; but to achieve the highest levels of transparency we would need a shared ledger that is updated and validated in real time with each network participant. This is exactly what Blockchain technology provides; It enables equal visibility of activities and reveals where an asset is at any point in time, who owns it and what condition it’s in.

For those of you that are not familiar yet with Blockchain technology, don't miss out the video below that explains in a few minutes how this technology works and why it can revolutionize the Supply Chain of the future.

Very summarized, some of the benefits of Blockchain technology in Supply Chain are:

- Reduce or eliminate fraud and errors
- Improve inventory management
- Minimize courier costs
- Reduce delays from paperwork
- Identify issues faster
- Increase consumer and partner trust

But how is Blockchain revolutionizing Supply Chain?

Let´s look at some of the biggest retailers in the world for example; Wall Mart and Carrefour.

Carrefour plans to use a Blockchain ledger to improve traceability of food in order to address damaged food issues and the brand damage impact this could have, but also the shift in consumer preferences towards added value on the transparency and sustainability of the food products sold.

Walmart has also made strides in incorporating Blockchain technology in its business. Walmart partnered with IBM to create a unique ledger among its network of suppliers as well. The retail giant plans to address the food quality and the cases of fictitious pickups to strengthen its logistics. IBM and Walmart ran tests on the pilot program on tracking mango shipments which cut tracking time from several days to two seconds.

domingo, 25 de febrero de 2018

What is the difference between Logistics and Supply Chain

In this very brief entry we are going back to basics in order to understand what is the different between these two terms that some people mistakenly think are interchangeable.

We define Supply Chain management as the set of activities associated with sourcing, procurement, conversion and logistics management. It also encompasses the coordination and collaboration with parties like suppliers, intermediaries, distributors and customers.

Logistics Management however is a small portion of Supply Chain Management that deals with the management of goods in an efficient way.

logistics vs supply chain management

sábado, 13 de enero de 2018

Extreme engineering: Container ships

One of my favorite programs of all time is Extreme Engineering; I have been fascinated by the mega structures humanity has been building all over the world!

Thinking about it, this will be the first time we talk about this in the blog, and it´s surprising considering how relevant Supply Chain is in any of these humongous projects.

To unveil this new section, I thought that the best episode to share with you is the third episode of the second season "Container ships.

This episode examines the docking of a container and the operation of the water front, where thousands of containers need to be unloaded and loaded in 48 hours. Also covered in the episode is the building of the Adrian Maersk, the world´s largest container ship, and the challenges faced by the engineering team.


martes, 21 de noviembre de 2017

Ocado: Shaping the future

It all starts with a concept and a vision, that turns into a mission, once you have that, the rest of the pieces will come together eventually.

Innovate, invest, empower, respect, change, lead...

From the very beginning:

Through the different stages:

Until the very end:

domingo, 15 de octubre de 2017

Zero waste - the Unilever journey

Waste minimization is the process of reducing the amount of waste produced with the aim to eliminate the generation of harmful and persistent wasters. Waste minimization involves efforts to minimize resources and energy use during manufacture.

Waste management on the other hand, focuses on processing waste after it´s created, concentrating on reducing, reusing and recycling products and components. Waste minimization should be seen as a primary focus for most waste management strategies.

Zero waste is a philosophy that encourages the redesign of resource life cycles so that all products are reused and no waste is generated, it encompasses more than eliminatig waste through recycling and reuse, it focuses on restructuring the production and distribution systems to reduce waste.

Many companies have set ambitious targets waste reduction, and factories have been targeted as the primarily function to trial waste reduction principles.

One prime example of this journey to zero waste is Uniliver; the giant FMCG started his journey back in 2009 with the aim to achieve zero waste across their global factory network by 2020. They achieved this target in 2014, 6 years ahead of plan. Here is how they did it:

The challenge is now to roll out these best practices from factories to distribution centres, head offices and customers. Hopefully one day, the zero waste philosophy will be part of everybody´s life, in the meantime, a few pioneers are showing us the way. Only a few changes in our day to day life will mean a start to a journey to reduce our impact in our planet.

domingo, 10 de septiembre de 2017

Just in time

Just-in-time manufacturing (JIT) also known as the Toyota Production System is a methodology aimed at reducing flow times within production systems as well as response times from suppliers and to customers.

It originated in Japan in the 1960s and 1970s, but the wise use of the term JIT faded in the 1990s as the new term “lean manufacturing” was established as a more recent name for JIT.


- Lower warehouse costs. Since less space is needed, this reduces the amount of storage an organisation needs to buy or rent.

- Less amount of inventory obsolescence, when companies use the traditional method of inventory they can end up with pallets of unsold items that simply go to waste

- Defect rates are reduced resulting in less waste and greater customer satisfaction.


- You become reliant on your suppliers. Suppliers need to be able to supply materials quickly with very limited advance notice and any unexpected even can derive in long term out of stocks.

- Employees are at risk of precarious work as employers seek to easily adjust their workforce in response to supply and demand conditions by increasing the amount of contracting and temporary work.

- By not carrying much of stock, the risk of out of stocks is higher making imperative to have the correct procedures in place to ensure stock can become readily available.

- More and better planning is required to ensure stock is available at all times

If you want to learn more, check out the video below that explains in detail what JIT is and all the elements around this philosophy. 

Couldn´t finish this post without some music. Happy week!

domingo, 23 de julio de 2017

Supply Chain humor

No better way to finish the weekend than with some humor!

Will seep dive into JIT in the next post, stay tuned!