Tatiane Chiles Toledo
Instituto Federal de São Paulo campus Suzano, Brazil
E-mail: tati_cht@hotmail.com
Geisiane Ferreira Silva
Instituto Federal de São Paulo campus Suzano, Brazil
E-mail: geisifs@hotmail.com
Wagner Roberto Garo Junior
Instituto Federal de São Paulo campus Suzano, Brazil
E-mail: wagner.garo@ifsp.edu.br
Submission: 30/12/2016
Accept: 12/01/2017
ABSTRACT
The
organizations maintain excessive inventories as a way to anticipate the
customer's need, taking, this way, competitive advantage. On the other hand,
the lack of stocks can stop assembly lines; change the production schedule;
increase costs and harm the marketing planning. However, there are costs in
relation to these inventories; therefore, set an appropriate policy stock
management is a critical factor for the success of a company, in addition to
obtaining sustainable competitive advantage in the long term. Considered by
many as the basis for managing the supply chain, inventory management depends
on clear definitions for the following questions: how much to ask, when to ask,
how much to keep in stock and where to find the stock. Therefore, there must be
a balance in relation to demand and stock supply. Increased market
competitiveness forces companies to lower their stock costs and may result in
loss of orders due to lack of product. This paper describes the process of
forecasting demand, and the methods of analysis forecasting as a tool to reduce
costs by simulating the methods of demand forecasting in order to improve the
level of stock. Thus, a case study was elaborated in the ABC Company, which
acts in the imported PPE business for analyzing the process and simulating the
techniques of demand forecasting. The results presented in the case study were
satisfactory actually observed divergence between the processes applied before
the company and applied studies directly on demand obtained with this
assertiveness in the forecast.
Keywords: Demand
forecast; Logistics; Supply Chain; Stock
1. INTRODUCTION
The
reduction of inflation in Brazil finalized a phase of revenue for the
organizations that was often the valuation of stocks (KRIEGER, 2002). Thus, a
thorough examination of inventory costs proved to be of fundamental importance
to the financial health and development of organizations. The main function of
inventories is to ensure the availability of products according to the
company's operational characteristics and to absorb the present uncertainties,
monitoring everything that has an impact on the level of inventories.
According
to Slack et al. (2007), the stock exists to compensate for the differences in
the rhythm between supply and demand of material resources, that is, if the
supply of any item occurred when demanded, the item would never need to be
stocked.
Based
on this concept, a case study was carried out, with the purpose to apply other
methods of forecasting demand. Thus, we analyze the continuous
stock balances of ABC Company in a way that allows the execution of
applications of forecast models of demand enabling verification by the models
and methods used to improve results accuracy of inventory levels.
According
to Ballou (2006), demand forecasting is imperative for the company in all
departments, as it provides parameters for supply and control. Therefore,
realizing this view, the decision was made to analyze the demand forecasting
process in the ABC Company and to apply different forecasting methods extracted
from various sources, in order to identify which methods present the best prediction
indexes in relation to the results obtained today by the process adopted by the
company.
In
addition, a decisive factor for the accomplishment of the case study was the
possibility of measuring and comparing the possible gains that would be
achieved if the ABC Company adapts its processes to a new model of demand
forecasting minimizing the lack of products and allowing the minimum possible
leftovers, resulting in cost reduction.
2. METHODOLOGY
The
case study proposes to analyze specifically the process of forecasting demand
in the ABC Company, which acts in the trade of imported PPE. The company is of
medium size and is currently one of the market leaders in the protective gloves
segment that was recently acquired by a
multinational group with more than 13.000 employees distributed in several
countries.
According
to Gil (1991), the case study is the intensive and deep study of few objects,
to obtain broad and specific knowledge of the same; almost impossible task in
comparison to other methods.
Already
second (YIN, 2001, 32):
“The
case study is an empirical investigation that investigates a contemporary
phenomenon within its real life context, especially when the boundaries between
phenomenon and context are not clearly defined. A research project that involves
the Case Study Method deals with at least four issues: what questions to study,
what data are relevant, what data to collect, and how to analyze the results.
To define the strategy as opposed to the use of experiments, data surveys,
historical research, is the consideration of the research question form, the
control required on behavioral events and the focus on events. (YIN, 2001, p.
40-77 – translated by the authors)”.
The data used in the study were
extracted from the ERP system and control spreadsheets available on the company
network, after analysis identified the importance to have the work based,
conducting a literature search using electronic media, books, articles and
monographs. Based on the theoretical reference, three products were selected,
according to the respective
classifications in the ABC curve concept, in order to perform an analysis on
items with different demand patterns.
Later, six forecasting methods were
applied for each product, selecting the real demand in a period of 12 months,
allowing to evaluate which method would achieve the best results if they were
adopted in practice. This analysis was elaborated using electronic spreadsheets
with data obtained from the company's ERP.
For the application of mathematical
models, we used graphs to present the results. Finally, the data obtained were
compared to the actual results of the ABC Company, in order to identify the
impacts generated by applying a forecast model more appropriate to the
company's demand.
3. LITERATURE REVIEW
3.1.
Logistics
The
term "logistics" has evolved over time, from a simple operational
approach to a concept of supply chain management. Logistics involves the whole
chain of services needed to interconnect a production point to a consumer
center.
Novaes
(2007, p.35) defines logistics by adopting the definition of CouncilofSupply
Chain Management:
“Logistics
is the process of efficiently planning, implementing and controlling the flow
and storage of products, as well as associated services and information, covering
from the point of origin to the point of consumption, in order to meet consumer
requirements (translated by the authors)”.
Considering
the logistics relationship with the world and with simpler everyday activities,
we can say that logistics is everything that makes us do a job well, avoiding
waste, high cost, and innovating besides controlling well what we have.
According
to Fleury (2000), one of the most important logistics elements today is Supply
Chain Management, it processes the logistics system, which deals with the flow
of materials and internal and external information in companies. With the
relationship that emerges along the chain, it seeks to ensure its best results
in terms of waste reduction and benefit to the logistics service.
This makes the logistics stops being a complementary and separate process, to
become a complex one that involves a chain of processes that meet a certain
demand.
3.2.
Supply
Chain
The
definition of the supply chain according to Ballou (2006) is the union of
logistic functions repeated several times in the process of converting raw
materials into final product, giving a higher added value to the product, being
that when the points of origin of materials and the commercial poles are not
located in the same region and the process involves several productive stages,
the logistics functions are repeated several times from the origin until the
delivery of the product to its final destination.
The
elements that make up the supply chain according to Novaes (2007), are the
supply of manufacturing, manufacturing, physical distribution, retail,
consumption and transportation, which are represented in Figure 1 and are
described as the organization that originates the raw material and the
industrialization of a certain product to the end customer.
Figure 1: Supply system - production-distribution
Source: Mundo dos negócios, 2016
Therefore,
it is understood that the supply chain and its management completely cover all
stages involved directly or indirectly in the flow of materials and information
from the source of raw material for industrialization to the receipt of the
finished product by the consumer. This process not only includes manufacturers
and suppliers, but also transport warehouses, retailers and customers
themselves.
Supply
chain management and planning are fundamental for companies to obtain market
competitiveness, achieving greater production efficiency due to a reduction in
minimum cycle time and inventory, functional operation, efficient and strategic
distribution, and in retail, consequently, it obtains greater customer
satisfaction and broad market share.
3.3.
Forecast
of Demand
In
recent years, the demand forecasting function has become important due to the
influences of a more competitive market. This fact can be proved by the use of
this technique in the various departments of organizational management, such as
the area of finance, human resources and sales. These predictions are also
effective in the operationalization of various aspects of production management,
such as identifying new business opportunities, anticipating future demands,
more efficient production scheduling, and inventory management
(SANDERS et al., 2003).
For
Diaz and Pires (2003), demand forecasting is a critical phase for a supply
chain team, due to the complexity and doubts of their activities. Because of
their importance in business, some companies have adopted some alternatives,
one of which is to create a specific area for demand management, which,
functionally, can be linked to the commercial, industrial, logistics or
financial directorate.
For
Gurgel (2000), stock management is closely linked to the possibility of
estimating the expected consumption of an item in a given future period. The
more accurate the demand forecast, the more information the material manager
will have to make decisions about what level of inventory to maintain and how
much to buy or manufacture to meet the needs of its customers.
According
to Bowersox and Closs (2001), there are three types of forecasting techniques:
the qualitative, the causal, and the time series. Qualitative techniques use
market information and expert opinions on commodities or in trades where
products are found to which future demand is to be predicted. A qualitative
technique may consider the past or not, when applicable or available.
According
to the author, this technique is ideal for situations where there is little
availability of historical data and the ability to analyze management. For
causal techniques, explanatory or independent variables are used to describe a
relation between an important event and its main causes, as it associates
historical data of the commodity with one or more variables. The author
considers this technique viable in the long-term forecasts.
Techniques
based on time series that predict future demand in mathematical models and
through statistical data. According to the author, this technique admits that
the future is similar to the past, so it considers that existing patterns of
demand will persist in the future. However, the applicability of this technique
is more coherent when compared to previous ones for short-term forecast
planning (BOWERSOX; CLOSS, 2001).
In
the case study, which is the main theme of this article, the quantitative
technique is used. Quantitative methods use historical data to anticipate
demand in future times. The forecast of the future demand promotes the
construction of mathematical models from the data that describe the change of
demand over time. This data set is called the time series (PELLEGRINI; 2000).
According ( ZANELLA 2015, p: 51) :
“Demand
forecasts are based on quantitative methods, but also depend on a qualitative
analysis of the integrated production planning of each plant, ie, those
responsible for each factory evaluate the scenario to also identify the best
use of the demand forecast (translated by the authors)”.
3.4.
Stock
The
stock can be defined as storage of material resources in a transformation
system (SLACK et al., 2007). The main function of inventory is to promote
balance between supply and demand. Thus, companies must minimize the total
logistical cost of inventories, transportation and order processing according
to a given product availability desired by the final
customer (CHRISTOPHER; 2011).
Using
some indicators can help with this task. Therefore, it is important to identify
the various activities relevant to inventory management such aslead-time of
resupply generating supplier reliability, demand forecasting, planning,
inventory control and costs to maintain inventories.
The
main factors that pressure stocks to rise according to Krajewski and Ritzman
(2002, p.69) are:
“•
Customer service: high inventories reduce the possibility of stock disruption;
That is, failure in the availability of an item to satisfy a demand at the time
it occurs;
•
Order cost: Each time the company places a new order, it incurs the cost of
preparing a purchase order from a supplier or a production order to the
production unit. Since, for the same item, the cost of placement is independent
of the size of the order, the tendency is to make large orders to dilute this
cost;
•
Cost of transportation: lower transportation costs can be obtained by shipments
of complete cargo, which requires an increase in the available inventory for
shipment;
•
Payment to suppliers: companies can choose to buy larger quantities, both to
take advantage of prices on the eve of a discharge and to obtain quantity
discounts (translated by the authors)”.
The
main reason for maintaining low inventories is that they represent an
investment, a part of the working capital, on which the company has to pay
interest, rather than receiving them. The cost of stock maintenance is the
variable cost of keeping the stock at hand and its three components according
to Ballou (2001: 75): "interest or opportunity cost; Storage and handling
costs; Taxes, insurance and losses ".
Stocks
can be classified into four types, as cited by Chopra and Meindl (2003, p.
123).
"•
Cycle Stock: The portion of total stock that varies directly with the size of
the purchase or production lot. The size of the lot varies directly according
to the time (cycle) between orders;
•
Security Stock: To avoid problems of uncertainty in demand, lead time and
supply, security stocks are generated. Such inventories ensure that operations
will not be interrupted when said problems occur. As demand uncertainty increases,
the required level of safety stock increases;
•
Stock of anticipation: these are stocks used to absorb predictable variations
in demand or supply. Seasonal demand patterns, strike threats, or severe
supplier capacity constraints should be smoothed out by anticipation
inventories;
•
Stock of movement: Inventories are moving from point to point in the supply
chain. Movement inventory consists of orders that have already been placed with
suppliers, but not yet received (translated by the authors)”.
One of
the most used concepts in the management of the supply chain for inventory
management is the ABC curve, which according to Ballou (2006), the hindrance of
any organization is the set of adversities related to each product.
3.5.
Foreign
Trade
According
to Dias (2008), international trade is essential for all nations, especially in
the era of globalization, because regardless of whether the country is
developed or not, its practice contributes to the capital turnaround and growth
of the economy.
The
importation in Brazil began in the 1990s, when President Fernando Collor de
Melo “Era Collor”, president who gave progress to modernization in Brazil
formulating guidelines and the objectives of foreign trade in its execution,
commanded Brazil. Since then, specific norms have been created, with an
emphasis on inflation control and the idealization of instruments for
importation, the modernization of the Brazilian industrial park and the
acquisition of new technologies (LUDOVICO, 2007).
The
globalization of the economy makes the exchange of goods and services between
countries happen faster, this movement tends to grow due to the need for
alliance between developing countries so that they can compete with greater
possibilities in the world market (VASQUEZ, 2007).
4. CASE STUDY: DEMAND ANALYSIS IN THE IMPORTATION PROCESS
FOR THE TRADE OF INDIVIDUAL PROTECTION EQUIPMENT
The
case study refers to the company ABC, which operates in the field of PPE,
specifically in the trade of gloves and goggles and has 140 direct employees.
Founded in 1988, it started as a family-owned business and
operated as a resale of steel mesh gloves. Over the years, new products were
added and the company followed the evolution of the market. Between 1997 and
2000, it launched its own brand and stopped representing other brands.
Currently
ABC is one of the largest in the glove and
safety glasses market in Brazil, reaching in recent years an expressive growth
rate in sales of more than 20%. Its products are imported from various
countries like China, Germany, India, Pakistan, Korea, Taiwan, among others. In
2011, an international group that acts in the distribution of equipment and
outsourcing bought the company. This group is, also present in 23 countries and
has more than 13.000 employees.
The
company ABC is located in the city of Guarulhos, in the neighborhood of CECAP,
near the International Airport of São Paulo and the President Dutra Highway,
facilitating the logistics and transportation process.
After
the acquisition of the company by the multinational group, one of the main
guidelines established by the new owner was the need to reduce inventories in
order to adapt the company to the standards practiced in the other companies of
the group.
This
would increase working capital, and minimize the present
opportunity costs in the company, generated by high levels of inventories. In
this context, it was necessary to evaluate the inventory management and demand
analysis process to identify possible failures and adjust the inventory to the
plans established by the new company controller.
The
company ABC has a varied product line, specialized in the protection of the
hands and eyes, focused on the safety of work in various segments such as:
agricultural, food, automobile, auto parts, cosmetics, construction, industrial
kitchens, electronic, refrigerator, logging, metalworking, mining, cleaning,
logistics, chemical, petrochemical, glazing, among others. Among the items
listed above, it adopted as a market
strategy to divide its product line into two: a traditional and more affordable
line of products and another line of high performance products with higher
benefit.
The
organization markets individual protection equipment imported throughout
Brazil, through regional distributors and several resellers, as well as
directly serving large end customers such as assemblers, mining companies,
refrigerator networks and industries of various segments. However, to market
this type of product in Brazil, companies must follow some standards, so that
all products are certified according to specific federal standard.
4.1.
Marketing
After
being certified, the product is placed in line. In order to generate demand,
ABC Company counts on several teams: from the marketing and the development
team, that elaborates new products according to the needs of the market, also,
counts on specialized technicians in labor safety that make a work of
dissemination of the products and offer more attention to the great clients and
resales.
Besides
these teams, the ABC Company also has an internal team and an
external sales team, the internal team being an active and passive Call Center,
in which calls are received from customers who wish to buy the products and
where employees offer the products to customers. In addition, the external team
is composed of commercial representatives dispersed by states.
When
a customer makes a first contact, a registration is made in the company's ERP
system and a check is made of all information provided by the customer. Because
of the policy adopted by the company ABC, sales are not made for individuals,
only for companies, and if a natural person contacts to buy the products, it is
sent to a reseller closer to their region.
Sales
orders are received by the internal team directly via telephone or via e-mail
containing the purchase order of the customers and are registered in the
company's system by the sales assistants. After the order is issued, the
customer receives a copy of the order, containing the items, quantities,
prices, payment conditions, freight type, carrier, place and date of delivery,
for analysis and approval of terms negotiated by the customer. Given this, the
sales team only forwards the processes after the confirmation of the customer.
After
the customer has formalized the approval of the order, the seller responsible
for the service forwards the request to the administrative sector that
coordinates the order processing. In the administrative department, a new
request information check is made to verify that the company policy criteria
are being met, such as the payment condition that cannot exceed the average
term of 42 days, the minimum order value that is R$ 800,00
and the terms of delivery. If any irregularity is found/noticed at
this conference, the request is returned to the seller responsible for
rectification.
Applications
approved for this verification are forwarded to the credit analysis process,
which is done by the finance department. To speed up the process, the company's
ERP system has a credit analysis module, which automatically approves
applications for active customers that have no restrictions, according to
criteria defined by the company. However, if the customer has any restrictions,
the request is blocked automatically by the system and a credit analyst is in
charge of the approval or disapproval of the request. For new clients, the
deadline for the credit analysis process is up to five business days.
The
next stage in the processing of the orders, after the credit approval, is that
the orders return to the administrative sector, which, forwards them to the
shipment according to the delivery date. As a rule, for orders received up to
15 hours and do not have credit
restrictions, the company ABC guarantees the delivery in 24 hours for the
customers of the metropolitan region of São Paulo or on the carriers, for the
requests of customers from other regions of the country.
4.2.
Importation
ABC Company
has a strong demand for its product line, which is composed of more than 500
active items that represent the company's monthly billing.
Considering the fact that more than 98% of these products are of foreign
origin, managing the purchases efficiently becomes a great challenge due to the
longer delivery times and the customs restrictions in Brazil.
The
company buys its products from factories distributed by several countries, each
of which specializes in one product line. Therefore, the time of a common
import process varies according to the origin and the demand of the products,
but on average, the purchase requests are sent to the supplier 180 days in
advance, from the date of creation of the order until the arrival of the Items
in the company warehouse.
The
purchase process starts with negotiation with the supplier, who in most cases
are already long-term partners of the company ABC and generally all terms are
already established, only having differences in the price according to the
variation of the dollar. After the order is formalized, on average the supplier
takes other 45 days to start production and 50 days to complete the lot. Once
it is ready, it takes about 70 days to load the shipment, considering the
entire time for loading, the transit period and the time for customs clearance.
4.3.
Demand
Analysis
The
analysis of the volumes in the company ABC is made through historical
consumption data and sales prospects provided by the development department.
For this analysis are used daily reports obtained from the company's ERP, as
well as spreadsheets to control the duration of inventories and control of
orders.
Starting
from the sales volumes, a monthly sales plan (projection) based on the average
sales of the last four months is created for each item and to complete the
composition of the plan, it is also considered the consumption of new clients
in the negotiation phase And market growth projections.
The
company's stock manager evaluates only the annual and quarterly average to
define the sales plan, which is the monthly sales projection that is used as the
basis for the creation and control of purchase orders. The follow up of the
requests is done through the worksheets of duration.
The
employee responsible for inventory management at ABC uses time control sheets,
where inventory levels are observed, based on average sales. In these
spreadsheets all purchase orders for items are posted, giving you a view of all
the available stock in the warehouse, the transit stock, the inventory that is
in production and future schedules. In addition, through the duration sheets it
is possible to identify possible stock breaks and the order point.
For
each supplier or product group there is a spreadsheet of duration, and in some
cases control of items that have more than one supplier through a single
spreadsheet. All worksheets follow the same pattern and are composed of the
product description, product code, sales average (quarter or four-month
period), sales plan (projection based on sales history and data provided by the
development department), stock available for sales (current stock less the
quantity in placed orders), duration (available stock divided by the sales
plan).
In
addition to these fields, (if)?there is a purchase order for the products in
the spreadsheet, the fields request (lot number), shipment date, quantity
requested (for each item), breakage (if the inventory duration is less than the
forecast returns an estimate of how many days the inventory will be discovered)
and stock duration after the placed order (quantity ordered divided by the plan
plus the current stocking duration).
4.3.1. Application of Forecast Models
For
the case study, the models of prediction of simple average, moving average,
dual moving average, simple exponential damping, Brown method and Holt method
were chosen. Each forecasting method was applied over a same period of real
demand data supplied by the company ABC in order to analyze what results would
be obtained with the application of each method to predict the stock levels
needed to supply the demand of the studied period.
In addition,
for the analysis of the forecast models, three products were selected according
to the ABC classification, in order to evaluate the applicability of each
method and the adjustment levels for both high turnover essential items and low
output items. Analysis of the prediction models, three products were selected
according to the ABC classification, in order to evaluate the applicability of
each method and the adjustment levels for both high turnover items and low
output items.
a) Product A
It was started the evaluation of the data and its
forecast with a product of curve A, that in the moment of the analysis
presented stock of approximately 475.000 pieces, being that its average
consumption is of 237.000 pieces, that is, a stock of two months. Chart 1
shows the current ABC sales plan.
Item curve A Plan
Chart 1: Demand analysis - Product A.
Source: Company ABC (2016)
The chart 1 shows that although the plan developed by the
company is linear, the forecast was very close to sales for most of the period
studied, and a large difference occurred between the plan and actual demand
only in the months 5 And 6.
In
the forecast by means of the simple average, it should be noticed that there
would be enough leftover in the months 02, 03, 07, 08, 09 and missing in the
months 05, 06, 10, 11 and 12, and in the 5th and 6th month, there would be an
out-of-normal inventory compared to the other months according to chart 2.
Chart 2: Simple Average - Product Rating A.
Source: Developed by the
authors (2016)
Applying
the Moving Average Method, it can be observed that in the months 07, 08 and 09,
there would be a surplus in the inventory, and in the others, inventory forecasting failure, analyzing chart 3.
Chart 3: Moving Average - Product Rating A.
Source: Developed by the
authors (2016)
According
to the method applied in the months 04, 05, lack of products, 6 and 07 would
occur surplus, 08, 09, 10 missing again and month 11, 12 balance between
forecast and demand analyzing chart 4.
Chart 4: Moving Double Average - Product Rating A.
Source: Developed by the
authors (2016)
Exponential
simple damping presented material surplus in months 03, 07, 08 and 09 with and
missing in months 05, 06, 10, 11 and 12, with the largest difference occurring
in month 5 of approximately 100 000. According to chart 5.
Chart 5: Simple Exponential - Product Rating A.
Source: Developed by the
authors (2016)
With
the Brown Method, results are very close to the simple exponential method, but
the leftovers level in months 07 and 08 would be larger according to chart 6.
Chart 6: Brown Method - Product Rating A.
Source: Developed by the
authors (2016)
The
evaluation of the use of the Holt Method shows that in this process the
leftovers level was larger compared to the other methods. In the absence of
product only in the months 04, 05 and 10 - according to chart 7.
Chart 7: Holt Method - Product Rating A.
Source: Developed by the
authors (2016)
b)
Product
B
The second item chosen for application of the methods was
a Curve B product, which in the period of studies showed average sales of 7,800
pieces and a stock of 44,240 pieces, which would last more than five and a half
months. Chart 8 shows the sales and demand analysis plan of ABC.
Chart 8: Demand analysis –Product B.
Source: Company ABC (2016)
The chart 8 shows that the company's sales plan was well
above demand for most of the period, and demand was only higher in months 5, 6
and month 2 by a small difference.
Applying
the simple average model, it should be noticed that there would be enough
leftovers in months 04, 07, 08, 09, 11 and 12 months 02, 03, 05, 06 and 10,
analyzing chart 9.
Chart 9: Simple Average–Product Rating B
Source: Developed by the
authors (2016)
It
can be observed that in the months in chart 10 - of Moving Average - there
would be a balance in relation to the lack and surplus of product, since, with
the forecast of 08 months, there would be leftover in the months 04, 07, 08 and
09, and there is in the months 05, 06, 10 and 12.
Chart 10: Moving Average–Product Rating B.
Source: Developed by the
authors (2016)
According
to the method applied in months 05, 08, 09 and 10, there would be a lack of
products, 04, 07, 11 and 12, between the forecast and the demand analyzed in
chart 11.
Chart 11: Moving Average Double–Product Rating B.
Source: Developed by the
authors (2016)
Exponential
simple damping had material leftover in the months 04, 07, 08, 09 and 11 and
was lacking it in months 02, 03, 05, 06 and 10, with the largest difference
occurring in month 5 approximately 8 000 according to chart 12.
Chart 12: Simple Exponential–Product Rating B.
Source: Developed by the
authors (2016)
In
the Brown Method, it was verified that in months 03, 06 and 12 there would be a
balance, in months 04, 07, 08, 09 and 11 there would be leftover stock and a
large difference of absence in months 05,10, analyzing chart 13.
Chart 13: Brown Method–Product Rating B.
Source: Developed by the authors
(2016)
Analyzing
chart 14, using the Holt Method there would be a discrepancy between forecast
and demand in almost every month, except in the months 08, 09 and 12, causing a
lack of efficiency in stock management.
Chart14: Holt Method–Product Rating B.
Source: Developed by the
authors (2016)
c)
Product
C
To finalize the application of the models, a
classification item C was selected as that has a demand with a higher variation
index. The stock available at the time of the analysis was 20,839, but the
average sales did not exceed 700 pieces, that is, the stock of the product
would last approximately 30 months. Chart 15 shows the current ABC
company sales plan.
Chart15: Demand analysis – Product Rating C
Source: Developed by the
authors (2016)
It is observed that the demand is higher than the sales
plan prepared by the company in the half of the months in the studied period,
and in the periods that the plan was higher, the difference was small in
relation to the demand.
According
to chart 16, there would be an imbalance between forecast and demand, making it
impossible to control inventory with greater accuracy.
Chart 16: Simple Average–Product Rating C.
Source: Developed by the
authors (2016)
It
can be seen in chart 17 that the Moving Average would occur with leftovers in
the months 06, 07, 09, 10 and 11 and lacked them in
the months 04, 05, 08 and 12.
Chart 17: Moving Average–Product Rating C.
Source: Developed by the
authors (2016)
Analyzing
chart 18, according to the method applied in the months 05, 08, 11 and 12,
there would be a shortage of products, and there would be a surplus in the
months 04, 06 and 09 between forecast and demand.
Chart 18: Moving Average Double–Product Rating C.
Source: Developed by the
authors (2016)
The
simple exponential damping showed a surplus of material in months 06, 07, 09,
10 and 11 and lacked in the months 02, 03, 04, 05, 08 and 12, and the biggest
difference would occur in month 5 approximately 2 000, conform the chart 19.
Chart 19: Simple Exponential–Product Rating C.
Source: Developed by the
authors (2016)
By
the Brown Method it is noticed that in months 10 and 11 there would be a
balance, in the months 04, 06, 07, 09 there would be leftover in the stock and
great difference to spare in the month 06, according to chart 20.
Chart 20: Brown Method–Product Rating C.
Source: Developed by the
authors (2016)
Analyzing
the chart 21 that demonstrates the Holt Method, it is noticed that there would
be a lack in the months 02, 03, 05, 07, 08, 10, 11 and 12, provoking
inefficiency in the stock management.
Chart 21: Holt Method–Product Rating C.
Source: Developed by the
authors (2016)
After
applying the models, a table was created in order to compare the forecasts
obtained with the company's current plan and to evaluate which methods would
obtain the highest hit rates in relation to the actual demand of the studied
period, as shown in table 1.
Table 1: Comparison of the results of the application
of the forecast models.
Source: Developed by the authors (2016)
Considering
the company's goal, which is to reduce stock shortages and leftovers, it was
chosen as the criterion for evaluating
the best method, the smallest difference between forecast and actual demand.
Thus, the Brown method was more effective for items A and C, whereas for item
B, the method that most approached the actual demand was the Simple Average
method.
However,
to evaluate the financial impacts at the end of the period, the results of the
best forecast models applied to the actual result obtained by ABC were
compared, considering the unit cost of each product supplied by the company. Table 2 shows the comparison of
values.
Table 2: Comparison of values in stock.
Product |
Unitary Value |
Current Plan |
Best Method |
||
Stock at the end of the period |
Total Value in Stock |
Stock at the end of the period |
Total Value in Stock |
||
Item A |
R$
0,80 |
24.905 |
R$19.924,00 |
-9.656 |
-R$ 7.724,80 |
Item B |
R$
1,07 |
22.299 |
R$23.969,91 |
-372 |
-R$ 399,87 |
Item C |
R$
2,58 |
-5.937 |
-R$ 5.939,58 |
287 |
R$
741,45 |
Total: |
41.267 |
R$
37.954,32 |
-9.741 |
-R$ 7.383,22 |
Source: Developed by the
authors (2016)
Table
2 shows that, if the method that obtained the best result in the study was
applied to each item, ABC would have a stock deficit in relation to demand in
the amount of R$ 7,382.38, but with the current plan, The company obtained
leftover stock and tied capital in the amount of R$ 28,466.47. That is, the
adequacy of the plan to the method that provided the least variation between
stock and demand levels would provide an approximate reduction of 20% in the
general stock levels.
Because
of the practicality of the spreadsheet developed for the study, it became
possible to carry out a deeper and faster analysis of all the
company's products, and it is only necessary the data from previous periods to
obtain forecasts and compare the results, assisting the responsible for
inventory management.
5. FINAL CONSIDERATIONS
According
to the work presented, through methods of forecasting demand in the
organization, several theoretical methods were studied, in different
bibliographic sources.
Considering
these methods, six forecasting models were applied for certain products, where
it was noticed that each prediction model has a different applicability, and a
method that is effective for a given product may not be feasible for another,
since according to the study, the lower the demand variation of the item, the
applied methods obtained better hit rates, but in cases where the product
presented greater differences in demand between the months, the use of some
models would not result in satisfactory predictions.
In
addition, to maintain stock levels according to company needs -
using the forecasting methods studied - would require an individual approach
for each product and create a planning according to the method that yields the
best results, Based on historical data and projections of market growth.
However, if stock levels are adjusted to indices very close to demand, there
may be a shortage of products in the face of any unexpected variation.
Therefore,
in order to minimize the lack of products, in addition to studying which model
of forecasting is the most reliable for the product, the company would need to
define an acceptable safety margin to avoid ruptures and leftovers of stock
and, taking these actions, one notices that it is possible to reduce inventory
costs, since analyzing the current method used by the
company, it was observed that despite the good indexes of correctness - when
applied to the products with the biggest difference in sales between the months
- the ABC company model generated leftovers from inventory for items with
higher turnover, increasing opportunity costs and reducing company liquidity
ratios.
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