www.syspro.comCopyright © 2014 SYSPRO All rights reserved.

Forecasting Strategies for Food Companies

How improved forecasting increases predictability and profits

Please feel free to ask questions throughout the presentation using the Q & A entry area in GoTo Webinar

Questions will all be addressed at the end of the presentation

Recordings of the presentation will be made available to all attendees

Copies of the slide decks will be made available to the attendees

Introduction

SYSPRO Software – who we are

SYSPRO in the Food Industry

Industry insights on Forecasting in the food industry

Demonstration – how Forecasting benefits entire company

Closing and Questions and Answers

Mauricio Lozano

Director of Operations for Nectar Juicery, Instructor in the BCIT Operations Management program, and industry visionary specializing in some of the most important challenges facing food manufacturers.

Steve Bassaw

Supply chain professional of 20 years whose experience includes materials management for one of BC's largest food processors and advising the BCIT Operations Management program. Steve is a Product Owner and supply chain specialist with SYSPRO Canada.

Global Organization

One of largest independent suppliers of Enterprise Business Solutions

14,500+ companies using SYSPRO Globally

Customers in 63+ countries across 6 continents

1,100+ Food and Beverage customers globally

1,300+ companies using SYSPRO in Canada

Highest customer retention in the industry

Specializing in manufacturers and wholesale distributors

A tool for making better decisions & happier customers

Look at past inventory usage ...

... to predict future needs ...

... with some adjustments for reality

Companies that have formal forecasting:

Increase inventory turns

Reduce inventory levels by over 20%

On $1 M in inventory

$200,000 injection of cash

$ 50,000 in carrying charges

Increased “Availability” by 10%

(# of sales) / (# sales + # lost sales)

$4M in sales at 30% GP = $120,000

Forecasting saves money

Forecasting

Mauricio Lozano

Instructor, Operations Management, BCIT

fore·castˈfôrˌkast/Verb

1. predict or estimate (a future

event or trend)."rain is forecast

for eastern Ohio"

synonyms:

Predict, prophesy,

prognosticate, foretell, foresee,

forewarn of "they forecast

record profits”s

noun

noun: forecast; plural noun:

forecasts

1. a prediction or estimate of

future events, especially coming

weather or a financial trend.

synonyms:

Prediction, prophecy,

forewarning, prognostication,

augury, divination, prognosis “a

gloomy forecast”

What is Forecasting?

Forecasting

Process of predicting a future event

Underlying basis of all business decisions

Sales

Marketing

Supply chain

Maintenance

Human Resources

Finance

Benefits

Sales

High service levels, require enough stock

Too much stock

Involves distressed product waste or discounted

Low stock

Involves dissatisfied customers, missed sales and bad reputation

Benefits

Marketing

Accurate budgeting for advertising

Marketing contribution planning

Knowing when and where to spend funds

Knowing when to remove spending to increase profit

Product life cycle stage

Benefits

Supply Chain

How much to produce & when to produce

Just in time management requires low levels of inventory or no inventory

Better purchasing contracts

Product storage is costly

Some supplies are sensitive to shelflife

Issues with over producing

Scrap

Setup

time

Late

deliveries

Quality

problem

s

Process

downtimeScrap

Setup

time

Late

deliveries

Quality

problem

s

Process

downtime

Inventory

level

Inventory

level

Benefits

Maintenance

When to schedule preventive maintenance

Anticipating equipment purchases

Scheduling overhauling

Project Management

Benefits

Human Resources

Right staffing level

Decisions on hiring or layoffs

Planning for vacations and holidays

Benefits

Finance

Profits planning

Earnings per share

Accurate overhead absorption

Underestimating volume can mean negative variances in utilities, taxes and salaries

Types of Forecasts by Time Horizon

Short Range

• 1 to 12 months

• Just in Time manufacturing plan

• Master Production Schedule

Medium Range

• 3 months to 3 years

• Budgeting

• Purchasing contracts

• Profits projections

Long Range

• >3 Years

• Capacity planning

• Product launches and discontinuation

Product Life Cycle

Introduction

Growth

Maturity

Decline

In what stage is your product?

Introduction Growth Maturity Decline

Moving Average

Polynomial Regression

Y = ax2 + bx + c

Linear Regression

Y = ax + b

Exponential Smoothing

Ft = Ft-1 + (At-1 – Ft-1)

Linear Regression (Trend Line)

Y = ax + b

Least Squares

Exponential Smoothing with Trend Adjustment

Ft = Ft-1 + (At-1 – Ft-1)

Tt = (Ft - Ft-1) + (1- )Tt-1

Best period to increase market share

R&D product engineering critical

Practical to change price or quality image

Strengthen niche

Cost control critical

Poor time to change image, price, or quality

Competitive costs become critical

Defend market position

Be

st

Mo

de

l to

Fo

rec

ast

Co

mp

an

y S

tra

teg

y/I

ssu

es

Sales

xnx

yxnyx

b

i

n

i

ii

n

i

xbya

Forecasting issues

Using shipment history

Relying on bad data

Excessive "gut feel" overrides

Poor event planning

Senior management meddling

Failing to measure sales forecast accuracy

Safety stock based on forecast error

Tolbert, Fred. 7 sins of Sales Forecasing. APICS

Magazine.2012 | 7 | 3

Thank you

Demonstration: forecasting in SYSPRO

I worked at food manufacturing company using SYSPRO

ForecastsMaterial

Requirements Planning (MRP)

Purchasing

Production

Finance

Sales

Customer Service

BENEFIT REASON

Save time creating PO’s Forecasts drive Suggested PO’s vs. spreadsheets/winging it

Buyers more proactive, strategic Forecasts = predictability = less fire-fighting

Lower raw material costs Negotiate contract prices vs. spot market

Lower freight costs Less expediting inbound raw materials

“What-if” agility See effects of forecast changes

Less storage space needed Carry less inventory

BENEFIT REASON

Save time creating Jobs Forecasts drive Suggested Jobs vs. spreadsheets/winging it

More proactive More predictable, longerproduction runs

Lower production costs Higher throughput, fewer changeovers, less O/T

“What-if” agility See effects of forecast changes

BENEFIT REASON

More money Carry less inventory on RM and FG

More money Higher service levels to customers = higher revenue

Lower costs Supplier contract prices vs. spot market

Lower costs Less expediting of inbound raw materials and outbound sales

Lower costs Less O/T in production

Lower costs Fewer write-offs of expired items

BENEFIT REASON

Higher sales Higher service levels

Fewer lost customers Higher service levels

Saves time Automated forecasts vs. spreadsheets

Simplify your business

Support forecasting requirements

Improve productivity

Realize fast, long-term ROI

Extend insight across your organization

Rapid deployment

A well experienced, national team

www.syspro.comCopyright © 2014 SYSPRO All rights reserved.