Category Archives: Tools

Forecasting your MRO stock

sgmentationForecasting is rarely anyone’s favorite activity.  In fact most consider it a pain, or possibly a black art.  It is even common for companies to say they do not forecast because it is impossible in their industry (absolutely not true).  When talking about MRO stock these types of attitudes are even more evident than with regular stock.  The problem, of course, is that forecasting is necessary for people within the company to do their job and if there is no formal forecast, people will just make it up as they go, which means no consistency between departments or processes.  Not good for efficiencies, effectiveness, or optimization of your processes.  Since MRO stock tends to have much higher SKU counts and much more erratic demand patterns it is even more difficult to forecast.  One of the more effective methods for forecasting materials with erratic demand patterns is a method called segmentation forecasting.  The basic assumption for this method is that the reason for the erratic demand is that there are several different types of demand influencing the total demand quantity.  The obvious answer to that is to determine what types of demand there is for the material, forecasting each of the demands separately and then adding all the forecasts back together.  Since MRO stock often has different types of demand patterns this is an excellent methodology to use for it.

The first step, obviously, is to first determine what types of demands the MRO stock might have.  While the answer to that would be specific to any given industry or organization I would expect to see some or all of these types of demand.

  • Preventative Maintenance – Demand that is created by participation in a preventative maintenance program
  • Breakdown Repairs – Demand that is created by unscheduled breakdowns of the machinery or process
  • Project part – Demand that is created by specific projects within the organization (one time or short term)
  • Direct Order part – Demand that is created outside normal requirements and process for specific but non-normal usage.

The second step would be to define a forecasting process for each of these types of demand. For example, Preventative maintenance demand can be directly calculated by the computer if a firm Preventative maintenance schedule and individual Maintenance BOM’s exist. (There actually may be multiple BOMS for a particular process if you do major / minor maintenance. So long as the schedule notes which type and BOM to use there is no problem. For instance, if you do oil changes twice a year but every forth maintenance cycle you also change the transmission fluid then the type one BOM would only reference a quantity of oil but the type two BOM would show both oil and transmission fluid.) Breakdown repairs would probably be a straight statistical process with a sliding scale based on age of the equipment. Project and Direct Order demand would probably require a manual forecast from the people creating the demand. In order to control the processes it would be a good idea to set up a RACI chart detailing forecast responsibilities.Segmented Forecast – Part # 123

The third step would be for whoever is responsible (refer to RACI) to actually run each of the separate forecasts as per the processes defined in the second step. These forecasts would then be gathered up and added together for each separate SKU. This would give you a forecast chart for each SKU that looks something like this:

This four are relatively common in any company. There may well be other types of demand that are specific to your industry.

Month

 Total Forecast Preventative Maintenance Breakdown Repairs Projects Direct Orders

Jan

23

20

3

  

 

Feb

25

 20    

5
Mar 23 20 3  

 

Apr

 100 20   80  
May 48 20 3  

25

Jun

 20 20      

Jul

 23 20 3  

 

Aug

 20

20

      
Sep 28 20 3  

5

Oct

 130 20   110

 

Nov

 23 20

3

    

Dec

 40 20    

20
Total 503

20

      

 

The total forecast is treated the same as any other forecast and can then be shared with other interested departments such as purchasing and finance to be used for their purposes as well as serving as a basis for determining inventory stocking levels, replenishment triggers, etc.

If you would like to discuss more about Forecasting either MRO or regular stock and how to improve it in your organization, I would be more than happy to meet with you and to explore this in more detail.  Please feel free to contact me at edwhite@jadetrilliumconsulting.com

If you would like to read more about this and other topics check out my other postings on my website – http://jadetrilliumconsulting.com

10 RULES TO IMPROVE COMMUNICATIONS

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10.  Jargon is not communications (neither are acronyms)

When communicating with another person always remember that jargon is agreed on shorthand for a particular concept.  Anyone with a different background probably will not know your jargon, or even worse, apply a different meaning.

9.    Be aware of non-verbal cues

Over 50% of all communications may be happening non-verbally.  Always be aware of other people non-verbal cues as well as your own.  Be very careful that your own non-verbal cues do not conflict with the message you are trying to communicate.

8.   Speak with emotion but not emotionally

A flat or monotonous tone is boring and risks losing the other persons attention.  Changing volume, tone, and showing animation will keep them focused on you and your message.  These are different types of non-verbal cues.  It isn’t just about body movement.

7.   Speak confidently and to the correct amount of detail

Confidence instills trust in both the speaker and the message but including too much detail is boring and erodes attention.  Always remember to initially only provide enough information to engage the person with the communications.   As the interaction continues, more information can be added based on feedback and questions from the other participant.  Communications is a 2 way process so make sure everyone in the discussion is included and participating.

6.   As a broad statement, different generations and cultures communicate differently

It is important to understand your audience.  People that have been raised in different times or cultures have a different way of looking at the world which translates into different communications styles.  For instance, boomers usually prefer face to face or direct voice contacts while millennials are generally more comfortable with text or email messages (raised with computers).  Having said that, always remember that every person is an individual and will have their own style.  Consider the differences in style between and extravert and an introvert, no matter what age they are.

5.  Always remember the 5 C’s  (Clarity, Completeness, Conciseness, Credibility, Correctness )

The 5 C’s of communications are the golden rules for how the message should be presented.  If any of them are missing or ignored the risk of failed communications goes up dramatically.  A failed communications can be either a miscommunication (misunderstanding) or an ignored communication.  Either one will not help you achieve your goal from the communication.

4.   How you communicate is more important than what you communicate

If people are not interested in what you are saying they will disengage from the communication process.   This means that for the communications to be successful you must capture the other parties’ attention.  As Marshall McLuhan said – “the medium is the message”, so how you present the communications will influence how the communications is received.

3.  Translate whatever you are communicating into terms that are important to audience (e.g. if talking to managers, use $ not units)

If you are initiating a communication for your own purposes it is counterproductive to assume the other party will translate any information into their own terms.  There are two main issues to that.  First they may get the translation wrong and, secondly, the harder they have to work at understanding the message the less inclined they are to bother.  Presenting information in terms they think in will be received much more successfully.

2.   Understand what is important to the other person

You will find this concept repeated over and over.  The message you are trying to communicate may be important to you, but if it is not important to them you are essentially pushing a boulder uphill.  If you understand what is important to them and can present your message in those terms you have a much better chance of engagement and therefore, success in your communications.

1.        Always clearly understand WHY you are communicating

If you do not clearly understand why you are communication to someone else, how do you expect them to either understand or effectively engage in the process?  How many times have you been involved in a conversation where you had no idea where the other person was going or why?  You may remember the discussion but it is highly unlikely you remembered the details or ever did anything with the information provided.  In order to communicate effectively it is important for all parties to understand why the communications is happening in the first place.

 

I hope you enjoyed this quick trip through the 10 Rules to Improve Communications.  I will be presenting a webinar on Communications on Thurs Jan 28, 2016 at 1 PM EST as a joint Professional Development Meeting for APICS Providence Chapter & APICS Hamilton Chapter.  There will be much more detail on these and many other points so feel free to join us.  If you are interested here is the signup URL:

https://attendee.gotowebinar.com/register/1943305808894432513