Capacity Planning The Antidote to Supply Chain Constraints

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Capacity Planning

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Supplier Factory Mfg DC Retail DC Store

Point of Sale

• The retail store is both the beginning & the end of the

retail supply chain

• It is the beginning of information flow and the end of

product delivery

• Yet, it is not connected to anything

We live in headless & disconnected

supply chains

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Headless Supply Chain = Questionable

Execution

Store

2 Store

1 Whol

DC’s

Supplier

DC

Supplier

Factory

?

When it comes to managing : 1. Space 2. People 3. Equipment 4. Working Capital

We are stuck with the current order load

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Once the consumer is connected to the factory every selling, transportation & warehousing activity that takes place from the time products leave the factory

to the time we put it on the shelf is subject to review & change for the better.

Introducing Flowcasting

• Integrated Business Model of the retail supply chain

• Jointly manage this Business Model to “A Single Set of Numbers“

• Complete visibility throughout entire Retail Supply Chain

Calculation

Calculation Calculation

Supplier Factory Mfg DC Retail DC Store

Point of Sale Whol DC

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Good Planning = Outstanding Execution

Flowcasting

52 Week Model of the Business

Warehouse

Management

Transportation

Management

Work Force

Management

Drives WMS, TMS & WFM:

How much whse space am I going to need in 2 weeks…2 months…for the holidays? How many truckloads will I be moving in 2 weeks…2 months…for the holidays?

How much labor will I need in 2 weeks…2 months…for the holidays?

Store

2 Store

1 Whol

DC

Supplier

DC

Supplier

Factory

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• To outline how integrated Flowcasting time-phased

plans can be translated into various operating languages

including capacity projections

• To demonstrate how the capacity projections can be

used to identify exceptions and resolve the exceptions

before they become problems

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Capacity Planning a 3 Echelon Supply Chain

DC West DC East Store #603 Store #602 Store #108 Mfg DC

Retail Stores

Wholesaler DCs

Manufacturer DC

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Visibility – Valid Simulation of Reality

• Long term plan becomes the short term plan (execution)

• Provides visibility to see and translate demand into

meaningful information for all trading partners

S

h

o

rt te

rm

Flowcasting’s

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• Planning Shipping Activity

• Planning Receiving Activity

• Planning Required Space

• Planning & Execution Promotions

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Flowcasting provides A Single Set of Numbers

Demand Sales Projection Outbound Volumes

Inventory Inventory Level Projection Space Requirements

Supply Purchases Projection Inbound Volumes

Projections in Units:

Demand, Inventory, Supply

Cash Flow Forecast Margin Analysis

Projected Inventory Costs

Rough Cut Capacity Planning Manpower Planning Space Planning Transportation Planning Multiply by Price/Cost Multiply by Cubic Feet or Weight

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Capacity Planning Examples

DC West DC East Store #603 Store #602 Store #108 Mfg DC

Retail Stores

Wholesaler DCs

Manufacturer DC

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Capacity Planning

Yardworks Lawn Tractors in the DC…

Sylvania Microwaves in the DC… with a promotion

Goodyear Eagle GPS Tires in the DC…

0 1 1 2 5 3 2 2 0 0 Planned Order 1 2 5 3 2 2 0 0 0 0 Planned Arrival 2 2 2 2 2 2 2 2 2 2 Safety stock 3 3 3 3 3 3 5 5 6 12 Projected On Hand 1 2 5 3 2 4 0 1 6 3 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks) 0 1 1 2 5 3 2 2 0 0 Planned Order 1 2 5 3 2 2 0 0 0 0 Planned Arrival 2 2 2 2 2 2 2 2 2 2 Safety stock 3 3 3 3 3 3 5 5 6 12 Projected On Hand 1 2 5 3 2 4 0 1 6 3 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks) 0 144 0 144 0 0 720 0 144 0 Planned Order 144 0 144 0 0 720 0 144 0 144 Planned Arrival 100 100 100 100 100 100 100 100 100 100 Safety stock 229 144 214 140 182 235 180 236 169 235 Projected On Hand 74 60 70 42 53 665 56 77 67 84 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks) 0 144 0 144 0 0 720 0 144 0 Planned Order 144 0 144 0 0 720 0 144 0 144 Planned Arrival 100 100 100 100 100 100 100 100 100 100 Safety stock 229 144 214 140 182 235 180 236 169 235 Projected On Hand 74 60 70 42 53 665 56 77 67 84 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks) 384 336 384 336 336 384 288 336 336 288 Planned Order 336 384 336 336 384 288 336 336 288 96 Planned Arrival 300 300 300 300 300 300 300 300 300 300 Safety stock 305 304 320 344 308 314 311 325 319 321 Projected On Hand 335 400 360 300 390 285 350 330 290 325 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks) 384 336 384 336 336 384 288 336 336 288 Planned Order 336 384 336 336 384 288 336 336 288 96 Planned Arrival 300 300 300 300 300 300 300 300 300 300 Safety stock 305 304 320 344 308 314 311 325 319 321 Projected On Hand 335 400 360 300 390 285 350 330 290 325 Shipping Requirements 10 9 8 7 6 5 4 3 2 1 Time (Weeks)

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Capacity Planning

Each product has a size, which can be expressed in cubic feet per consumer unit...

= 66.1 cubic feet

= 3.3 cubic feet

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Capacity Planning

Each product has a size, which can be expressed in cubic feet per consumer unit...

= 66.1 cubic feet

= 3.3 cubic feet

= 2.2 cubic feet

The output of our planning process is by item/facility in consumer units, so we can easily translate our plans for other purposes.

These translated plans can then be aggregated to

any level above item/facility that is

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Aggregate Planning

For example, the Yardworks Lawn Tractor and the Goodyear Eagle GPS Tire are both stocked at DC West

1 2 5 3 2 4 0 1 6 3

Shipping Reqts (Units)

10

9

8

7

6

5

4

3

2

1

66 132 331 198 132 264 0 66 397 198

Shipping Reqts (Cubic Ft)

335 400 360 300 390 285 350 330 290 325

Shipping Reqts (Units)

737 880 792 660 858 627 770 726 638 715

= 66.1 cubic feet

= 2.2 cubic feet

By expressing each item’s projected Shipping Requirements in cubic feet...

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Capacity Planning

…

we can project the total outbound cubic feet that DC West will need to ship each week, by adding up the cube for each product.

10

9

8

7

6

5

4

3

2

1

66 132 331 198 132 264 0 66 397 198

737 880 792 660 858 627 770 726 638 715

DC West uses this aggregate projection to look ahead and ensure that they will have enough manpower, equipment and available dock doors to

handle the upcoming outbound load in each week.

803 1012 1123 858 990 891 770 792 1035 913 Outbound Cube

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Capacity Planning

In a similar way, we can convert our Projected On Hand by item into cubic feet as well.

10

9

8

7

6

5

4

3

2

1

198 198 198 198 198 198 331 331 397 793

Proj On Hand (Cubic Ft)

671 669 704 757 678 691 684 715 702 706

Proj On Hand (Cubic Ft)

This aggregate projection is used to ensure that we will have sufficient storage space in DC West to handle what is planned. In peak periods,

for example, it may be necessary to rent 3rd party storage space. This requires planning ahead.

869 867 902 955 876 889 1015 1046 1099 1499 Space Reqts

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Capacity Planning

By also converting the Planned Arrivals to cubic feet...

10

9

8

7

6

5

4

3

2

1

66 132 331 198 132 132 0 0 0 0 Pl Arrivals (Cubic Ft) 739 845 739 739 845 634 739 739 634 211 Pl Arrivals (Cubic Ft)

… DC West can ensure that they have enough manpower, equipment and available doors to handle their receiving load in each week.

805 977 1070 937 977 766 739 739 634 211 Inbound Cube

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Capacity Planning

By using Flowcasting’s time-phased plans to produce item level projections by item/facility...

…our facilities get their capacity plans for free.

Where appropriate, the plan can be converted to other units of measure as well (e.g. weight, pallets, trucks, picks, etc.).

DC East DC

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Total Manpower Planning DC West

0 100 200 300 400 500 600 700 800 900 1000

Week 1 Week 2 Week 3 Week 4 Week 5 Week 6

Shipping Hours Receiving Hours

Normal Capacity

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Solving DC West problems before they occur

Time

C

apac

it

y

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• The day you can plan, in a time-phased manner, your capacity

requirements for capital, people, equipment, and space is the day

you can identify and resolve 90 percent of your future capacity

constraints. The capacity constraints you are left with are the

here-and-now types of constraints inside your replenishment release

horizon.

• Most of these here-and-now constraints can only be resolved by

spending more money than you normally would want to: for

example, shipping the next order immediately by a faster and more

expensive mode of transport to avoid a stock out.

• As the old saying goes, “You can solve any problem; it’s only a

matter of time and money.” Time-phased planning systems like

Flowcasting give you more time to solve your capacity constraint

problems.

• Those few constraints that are left can only be solved with money

.

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• There are no secrets anymore on how Retail Supply

Chains actually work today. We have the understanding,

and the technologies to:

• Develop an