Without exception, every retail client we’ve worked with struggles with this simple ask. Everyone has been so conditioned to focus on “ordering” that they struggle to understand that ordering (or committing the planned shipment) is the last decision, not the first. They are focused on “do we need to order” in week 1, rather than planning arrivals and the corresponding ship dates (i.e., planned shipments) first.
Planned shipments are the foundational construct of Flowcasting and how the process integrates the retail supply chain to ensure the fundamental principle is achieved – that is, a valid simulation of reality. Every planned shipment consists of an arrival date (when the product will arrive at the destination) and a ship date (when the product will ship from the supplying location).
Flowcasting plans shipments over the entire planning horizon and shares these projections with suppliers and other stakeholders in order to help them plan and improve productivity. For suppliers we often refer to what is shared with them as a supplier schedule – that is, the projection of planned quantities and their associated ship dates by product and origin/destination.
Ship dates are the key element to anchor the supplier schedule on. That’s because ship dates are very specific from a supply chain and work perspective. It’s when the inventory needs to be available and also when transportation needs to be scheduled to initiate the delivery.
The supplier schedule is, in most cases, the culmination of Working Backwards for a retailer who is using Flowcasting. From the forecast of consumer demand, we work backwards to calculate when product needs to arrive and ship, through the entire distribution network, right back to when the factory needs to ship the product – integrating the entire supply chain via a series of dependent, cascaded planned shipments.
When you first hear the phrase Working Backwards it sounds like a dumb idea and implies you’re heading in the wrong direction. Turns out, it’s been a proven and brilliant way to drive innovation.
It also turns out to be the best way to plan inventory flows for the retail supply chain.
The Arrival Based Plan
For those students, here is the arrival based plan for the example outlined above:
What’s important to understand is that the planned arrivals that are calculated above would be the same, regardless of supply source. They indicate the quantity and timing of a shipments arrival and are not dependent on the supply source. The planned shipment, of course, is dependent on the supplying source and the transit lead time.
This make arrival based planning a powerful approach since it enables you to easily plan a change of source well into the future and have all the cascaded dependent demand reflect a valid simulation of reality.