How can IBP for Inventory be integrated into S&OP processes in terms of time horizon and buckets, with Inventory Optimization standard solution running in weeks (horizon 13W) and S&OP in months (horizon 12 months)? How would be the impacts of these inputs (Demand Forecast, CV, PBR) and outputs (Recommended Safety Stock, On Hand Stock)?
The client context is explained below:
- Nowadays, the client does not calculate theoric safety stock. And they just estimate the monthly stock to guarantee the operations and customer attendance.
- Currently, the demand forecast is performed on a monthly basis, so demand is disaggregated equally between weeks. However, the client carried out an analysis to understand the demand behavior. As result, the demand for its products does not follow a standard pattern, with different percentages each week for each product.
- The big issue is that S&OP is executed in a monthly basis and the Inventory Optimization runs by weeks. Therefore, we know that the correct way should be run both in weeks, but it is not possible.
- We tried to aggregate by sum, average or viewing only the last period, to be directed to the S&OP (which is executed on a monthly basis), but the results are not similar to the inventories actually practiced by the client in the month. Therefore, the client is asking if there is a better way to visualize this number on a monthly basis. Also taking into account the current way of disaggregating the demand forecast. But also, if this approach of being executed in weeks, visualized and directed to S&OP on a monthly basis is really correct.
- Scenarios have already been created adjusting the Periods Between Replenishment (PBR) to 2 or 4 weeks, but the results are slightly distorted, due to the technical weeks breaks. We believe that it is not the best way to run IO to calculate montlhy stocks.