Basics of Logistics

1
General Logistics I Tutorial Forecasting
Methods
Mariya Arnaudova phone [phone] Email
m.arnaudova_at_jacobs-university.de School of
Humanities and Social Sciences
2
Important conclusions
a differentiated material scheduling needs a
classification of items
items differ between characteristics which are
relevant for the procurement logistics, e.g.
amount, price, consumption rate etc.
using material scheduling methods without item
classification would lead to ? lower achievement
of logistics targets ? e.g. a high inventory
level
3
Methods ABC-Analysis

• The ABC Analysis classifies goods according to
  their amount- value- ratio into three different
  categories
• Now you will have to put yourselves in the shoes
  of the managers and decide which parts are for A,
  B or C class.
• Do not forget that this method is constantly used
  in all companies, so you need to know it very
  well!
• This method will most probably be a part of your
  exams!

4
ABC Analysis Exercise

• You have the following data

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ABC Analysis Step 1
Rank the items according to their Value in ?
The highest of value is ranked with 1, and so
on
6
ABC Analysis Solution Step 1
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ABC Analysis Step 2
Assign the ranks according to your own managerial
decision. A-parts need to have the lowest
cumulated amount .
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ABC Analysis Solution Step 2
So now we know for which part we will have to
prepare detailed forecasting.
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Material Portfolio

• According to this upgraded material portfolio,
  you can decide on which forecasting method to use
  for the different classes of products

A-Parts
B-Parts
C-Parts
Just-In-Time
Just-In-Time
R -Parts
S -Parts
Stockpiling
Planning if necessary
U -Parts
R regular parts S sporadic parts U
unregular parts
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Types of Material Requirement Important for the
exam
Types of Material Requirement
determination by origin and manufacturing level
determination under consideration of goods in
stock
primary requirements
secondary requirements
tertiary requirements
gross requirements
net requirements
demand for resources, parts or manufacturing
groups necessary to fulfil the primary
requirements
demand for saleable products (market demand)
period oriented primary, secondary and tertiary
requirements
gross requirements less available stock
demand for factory supplies and auxiliary
materials
Nyhuis
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Characteristics of Requirements Planning Methods
deterministic methods (program-controlled)
stochastic methods (demand-driven)
heuristic methods (estimation)
methods
orders
consumption/time
expectations
III
III
III
II
II
II
I
I
I
time
time
time
today
today
today

• production program
• bill of material
• advance time
• inventory

• consumption statistics
• consumption
• prognosis

• no numeric data
• required

required data
area of application

• customer specific
• articles of high value

• delivery times shorter
• than throughput times
• articles of average value

• mass-produced
• articles of low value

IFA
12
Demand Driven Requirement Planning Method

• Uses PAST data for consumer consumption
• Used for B-parts mainly
• There are three main types
• 1. Method of moving average
• a) Method of moving average
• b) Method of moving weighted average
• 2. Method of exponential smoothing
• 3. Least square method too complex
  completely mathematical and statistical method

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Method of the Moving Average
target
The method of the moving average aims at
eliminating randomly occurring irregularities in
the course of a time series.
characteristics

• The time series should possess the following
  characteristics
• constancy to a large extent
• only small fluctuations
• no trend or seasonal influences

consumption flow
method of the moving average
consumption
m
?
time (periods)
1 2 . n n1
Vn1 predictive value m amount of
considered past values Ti consumption of
period i
fir
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Method of Moving Average Exercise

• You have the following data
• Now with this data calculate the demand for the
  11th month with the help of Moving Average
  Method

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Moving Average Step 1
consumption
consumption flow
m
?
1 2 . n n1
time (periods)

• Now according to the formula we make simple
  calculations
• m 10 periods
• Sum of demand for 10 periods 9580851006050
  45504035 640
• ? Required quantity 640/10 64 units

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Method of the Moving Weighted Average
target
In addition to the method of the moving average,
the different periods taken into consideration
are weighted within the method of the moving
weighted average. Younger periods get a higher
weighting than older periods. It is the intention
of this method, to put an emphasis on younger
periods, in order to be able to react better to
consumption changes or trend-setting
developments. This method is more complex than
the method of the moving average, due to the fact
that the weighting factors have to be updated
constantly.
consumption flow
method of moving weighted average
consumption
m
?
time (periods)
1 2 . n n1
Vn1 predictive value m amount of
considered past values Ti consumption of
period I Gi weighting of period I
fir
17
Method of Weighted Moving Average Exercise

• You have the following data
• Now with this data calculate the demand for the
  11th month with the help of Weighted Moving
  Average Method

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Method of Weighted Moving Average Exercise
consumption flow
consumption
m
?
time (periods)
1 2 . n n1

• Now with a little bit more complex calculations.
  The weighting factor puts more stress on the
  latest sales, than on the previous ones.
• So Quantity for period 11 is
  (950,01800,030,05851000,07)/(0,010,030,0
  50,07)
• Our answer here is 52 units.

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Method of Exponential Smoothing
target
During the method of exponential smoothing, the
data of the different periods is being weighted
with a smoothing factor a, which value can be
chosen between 0 and 1. This method is similar to
the one of the moving weighted average and
therefore is also performed in order to be able
to react quicker to seasonal changes and trends.
characteristics

• The time series should possess the following
  characteristics
• constant consumption
• few randomly occurring fluctuations (high
  responsiveness to such fluctuations)
• In addition to that, two different methods of
  exponential smoothing exist, exponential
  smoothing of the 1. order and exponential
  smoothing of the 2. order (seasonal influences)

consumption flow
method of exponential smoothing of the 1. order
consumption
a 0,3
m
?
time (periods)
1 2 . n n1
V1,n1 predictive value (of 1. order) a
smoothing factor V1,n predictive value of the
last period Tn actual consumption of the
last period
fir
20
Method of Exponential Smoothing Exercise

• You have the following data
• Now with this data calculate the demand for the
  11th month with the help of Exponential
  Smoothing
• Calculate with different alfas 0,2 and 0,7 and
  compare results

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Method of Exponential Smoothing Relevant
Forecast from Past period
consumption flow
a 0,2
m
?
a 0,7
time (periods)
1 2 . n n1

• With alfa 0,2
• Quantity for period 11 55 0,2(35-55) 51
  units
• With alfa 0,7
• ? Quantity for period 11 55 0,7(35-55) 41
  units

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Characteristics of Requirements Planning Methods
deterministic methods (program-controlled)
stochastic methods (demand-driven)
heuristic methods (estimation)
methods
orders
consumption/time
expectations
III
III
III
II
II
II
I
I
I
time
time
time
today
today
today

• production program
• bill of material
• advance time
• inventory

• consumption statistics
• consumption
• prognosis

• no numeric data
• required

required data
area of application

• customer specific
• articles of high value

• delivery times shorter
• than throughput times
• articles of average value

• mass-produced
• articles of low value

IFA
23
Program-Controlled Demand Planning

• Used mainly for A-parts
• Uses the current data of orders (e.g. Bill of
  material)
• Why is the bill of material so important?
• ? It gives information for the gross
  requirements.
• How is Program-Controlled Demand Planning done?
• Determine gross requirements from bill of
  materials
• Calculate the net requirements as you
• - stock on hand
• reservations
• - job-shop inventory
• - stock on hand

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Bill of material types
bill of material types
structural bill
product structure graph
summarized bill
one-level bill

• displays information
• about the
• correlations
• between the
• different parts
• (similar to product
• structure graph)
• information is
• presented in a
• table and not in a
• graph

• displays the
• structure of a
• product
• can either displays
• scheduling levels or
• manufacturing
• levels
• a special form of a
• product structure
• graph is the
• Gozintograph

• displays only one
• manufacturing
• level
• therefore several
• one-level bills are
• necessary to
• display a whole
• product

• does not give any
• information about
• correlations
• between products
• (e.g. which part
• belongs to which
• assembly group)

acc. to Kummer fir
25
Summarized Bill, One-level Bill, Structural
Bill. Which is which?
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Product Structure Graph
example of a product structure graph under
aspects of assembly
amount of parts single parts
assembly groups
10
level 0
1
1
8
13
27
18
level 1
1
2
1
2
8
1
1
88
40
27
32
46
52
81
level 2
2
1
1
98
40
52
level 3
example of a product structure graph under
aspects of scheduling/planning
10
level 0
1
1
18
13
level 1
8
1
1
2
8
1
1
27
46
level 2
32
27
81
88
40
2
2
1
1
52
52
40
level 3
98
acc. to Kummer and DIN 199
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Final exercise on Bills of Material and Product
Structures

• You have the following data
• Machine M (code no. 100) consists of two pieces
  of assembly group (AG) 88, one piece of AG 40 and
  two pieces of AG 32. The assembly groups
  themselves consist of different single components
  (SC).

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Make the summarized bill of material
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Summarized Bill Solution
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Make One-Level Bill of all materials
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Solution One-Level Bill of all materials
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Last but not least, make a Product Structure
Graph of machine M
Do not forget! There are two aspects of the
Product Structure Graph one with respect to
manufacturing and one with respect to scheduling
and planning! Show me that you can do both! ?

• Now use your imagination -)

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Solution Product Structure Graph
Under aspects of assembly
amount of parts single parts
assembly groups
100
level 0
2
2
1
88
32
40
level 1
2
1
2
1
1
1
1
1
52
81
49
40
46
level 2
72
70
77
1
1
1
level 3
72
70
77
Under aspects of scheduling/planning
level 0
100
2
2
level 1
32
88
1
2
1
2
1
1
40
level 2
52
81
49
40
46
1
1
1
1
1
1
level 3
72
72
70
70
77
77
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The end Do you have any questions?
Mariya Arnaudova phone [phone] Email
m.arnaudova_at_jacobs-university.de School of
Humanities and Social Sciences