Out-of-Stock indicators calculation

Methodology overview

Dec 2007

Contents

Brief history of key business indicators Existing OOS definitions Tailoring OOS to our situation OOS indicators group Report layout/distribution

History of business indicators At the end of 19th century companies producing diverse products emerged decision-making now required business information

Pre-requisites for business indicators calculation

Data storage facility historical data warehouse Computing power Source information within the computer-based system Methodology

Terms: Organization levels

SAP era
Sales Organization (SO)

pre-SAP era

= =

Franchise

Plant Plant Plant

Depot Plant Plant

Terms: Time Daily level calculation 5 days a week only working days (Mon-Fri)

Terms: Initial Data for calculation Actual Stock

Opening balance of each date 2 out of 6 stock categories
Unrestricted Transfer within a plant

Actual Sales
Sales on date of settlement Sales for weekend are added to next Monday

Sales Forecast
weekly forecast -2 weeks

Typical Weekly Sales Forecast

March sales forecast (all SO, all SKU)

Standard Pack (in ph.c.)

2x6 PET 2x8 PET

2x6 PET

OOS definition

Backorder OOS = 100 % SalesForec ast

[ ph.c.] [ %] = [ %] [ ph.c.]
Backorder - difference between cases ordered and reconciled invoice in case at the scheduled departure time for a delivery vehicle an SKU ordered is not loaded.

We need to try to figure out another logical way of calculation.

Service Level definition

SKUAvailab le # ServiceLev el = 100% SKUTotal #

[ each] [ %] = [ %] [ each]
Shows how many SKUs out of forecasted list are available

OOS: Stock vs Forecast method

max ( 0, SalesForec ast Stock ) OOS = SalesForec act

SalesForecastWeekly SalesForecast = 5

(1)

OOS: Stock vs Forecast method (graph)

OOS

Introducing Actual Sales Sales might go on with low stock Reasons:

Just-In-Time production/delivery Incorrect stock showing in the source system

( SalesForecast ActualSales ) OOS = SalesForecact

WHERE Stock < SalesForecast AND ActualSales < SalesForecast

(2)

Introducing Actual Sales (Graph 1)

Oversales

OOS

Introducing Actual Sales (Graph 2)

No OOS OOS

Introducing Actual Sales: results comparison Daily calculation W1-749 on SKU/plant level aggregated

(1) SF vs Stock

9.86%

(2) SF vs Stock/Sales

9.06%

Sales Restriction
Sales are restricted when Stock Level reduces to 2-5 days

( SalesForecast ActualSales ) OOS = SalesForecact

WHERE Stock < SalesForecast * K AND ActualSales < SalesForecast

(3)

K Stock Threshold
too low not helps much too high we consider low sales as OOS

K = 2 at this level sales are very likely restricted

Sales restricted due to low stock (Graph 1)

175736 Coca-Cola 2x6 PET Regular at plant 0136

No OOS

Undersales?

Sales restricted due to low stock (Graph 2)

175736 Coca-Cola 2x6 PET Regular at plant 0136

OOS

Sales Restriction: results comparison Daily calculation W1-749 on SKU/plant level aggregated
(1) SF vs Stock

9.86%

9.06%
(2) SF vs Stock/Sales

11.09%
(3) SF vs KStock/Sales

Introducing Weekly Sales level check

Sales on each day of the week are not equal

Even if some days if week gone undersale weekly sales forecast might be fulfilled

Introducing Weekly Sales level check (Graph 1)

67266 0.5x12 APET Tea Berry at plant 0136

OOS Oversales

OOS and Lost Opportunity

OOS evident loss of sales FG Stock is build basing of Weekly Sales Forecast

Lost Opportunity based on proposition that sales could go on on condition FG is available

Calculation OOS (2) is Lost Opportunity

Weekly Sales check OOS definition

( SalesForec ast ActualSale s ) OOSdaily = SalesForec act

WHERE Stock < SalesForecast * K AND ActualSales < SalesForecast

(4)

max(SalesForecast ActualSales;0) OOSweekly = SalesForecast

OOS = min(OOSdaily, OOSweekly)

Introducing Weekly Sales level check (Graph 2)

OOS Daily = 0 phc No OOS

OOS Weekly = 21430 phc

Weekly Sales Level check: results comparison Daily calculation W1-749 on SKU/plant level aggregated
(1) SF vs Stock (4) Weekly level

9.86%

9.26%

9.06%
(2) SF vs Stock/Sales

11.09%
(3) SF vs KStock/Sales

Out-of-Stock YTD

Product/Pack

II 5.58% I

IV 2.85% III
4.99%
SO

SKU

9.26%
Plant

SKU -> Product/Pack (promo/regular)

promo

regular

SKU -> Product/Pack (sales without forecast)

Sales without forecast YTD 5 689 029 ph.c. 4% of Sales Forecast

2 506 601 ph.c. Coca-Cola 762 523 ph.c. Sprite

Plant -> Sales Organization Actual sales not for all plants are available (4 plants have sales forecast and no actual sales) 10 Sales Locations which have no dedicated Plant in SAP If Sales Forecast on SO level is fulfilled then it is not Out-Of-Stock situation. Its Lost Opportunity

Service Level Shows how many SKUs out of forecasted list are available

SKUAvailab le # ServiceLev el = 100% SKUTotal #

SKU Available # - count of SKU with 5 of more days of sale on stock SKU Total # - count of SKU forecasted Calculation on daily level, SKU, Plant.

OOS Indicators Group OOS indicators

sales lost due to not enough stock

OOS

(Product/Pack SO / weekly level), % of Sales Forecast availability of FG

Service Level

(SKU Plant / daily level), % of positions with at least 5 days stock whatever could be sold additionally in case sufficient FG stock is available (SKU Plant / daily level), % of Sales Forecast

Lost Opportunity

OOS Indicators Group OOS indicators YTD OOS

2.85% 72% 9.06%

SLA SLA
Although it is not SLA, still its important and useful indicator to be measured on

Service Level

Lost Opportunity

List of Exclusions for OOS/Service Level

OOS and Service level measure Planning Department performance Some global reasons might prevent Sales Forecast supply
Temporary delisted products (f.i. Fruktimes during the peak season); Permanently delisted products (f.i. Fanta Wildberry); Shifted timing in Sales Forecast; Serious engineering problems (f.i. when glass line fails to start).

Not controlled/influenced by Planning

OOS Report distribution Report is issued on weekly basis

On Monday calculation is performed and report is submitted to Production Planners approval On Tuesday the report is published

Report is based on pivot tables allowing user to drill-down as deep as required makes possible OOS analysis. OOS for previous years is to be aligned with current calculation method in order to enable historical benchmarking.

OOS Report layout (table) Pivot table with free characteristics

OOS Report layout (graphical representation)

OOS indicators group vs Traditional Method

+
More realistic showing Many variances are considered Sandbox graphical representation
Conveys information better Enables drill-down analysis

calculation is complex, not transparent and resource-demanding

OOS Visualization Tool

shows stock/sales situation on SKU-Plant level

Visualizer Tool