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Do You Know How to Analyze a Flow?

By Bernard Milian
colored liquids in glass beakers, representing supply chain flow analysis

One of the great strengths of Demand Driven methodologies is to provide supply chain visibility.

Even if you don’t know anything about a company or its products, you can understand a lot of things by examining an analytical graph of stock history for an item or family of items — and find ways to improve.

Let’s give it a try.

One of the key features that we are going to exploit is that, every day, the status of the items is historicized. It’s basic, but try to create the same kind of visualization in your ERP: Stock history and replenishment parameters.

Here is the history of the last six months of our sample article’s behavior.

Demand driven chart of an example item's 6-month stock history from Intuiflow

It’s clear, right?

No?

OK, let’s break this down into several components.

First we have a red / yellow / green buffer zone that shows stock status and demand and evolves over time:

Visualization of demand driven stock buffers for a sample item

We can see that this evolution is gradual, smoothed over time. The evolution of top of yellow shows that the demand for this article has increased, then is in a slowing down phase:

Demand driven buffer chart that shows the buffer slowing down

You can also see on this graph that the green zone doubled along the way. The minimum order / lot size has been increased. Hum. It is what it is. There may be a good reason for this:

Demand driven chart that shows a time when the green zone doubled for a sample item

Did the planner follow the order recommendations? Let’s look at the net flow equation. When it goes down to the top of yellow, we must replenish at the top of green. We can see that this is rather respected, even if sometimes we went a little above top of green:

Demand driven chart that shows the net flow equation and reveals when to order

Did the stock do well? Shoot, not really, we were out of stock:

Demand driven chart that reveals the time when a sample item was out of stock

You can see from the qualified demand and delivery history that we were behind — that qualified demand increased due to immediate and past-due demands. But we cleared that backlog as soon as we received the inventory:

Chart showing qualified demand and delivery history

Is this shortage due to the planner not following the recommendations? No, it is not.

Is this shortage related to a bad sizing of the buffer / the replenishment loop? A priori no, the behavior is good overall on the observed horizon.

Is this shortage due to exceptional customer demands? No.

Is this shortage related to a delay from the supplier? Clearly yes — in view of the available flow, there are several small orders that have been placed, but delivered in one go:

Demand driven stock history chart with arrows that show when small orders were placed

Maybe our small batch ordering method is causing the supplier problems, and maybe that’s why we just increased the green zone?

On the other hand, at the end of the horizon, the stock may be a bit high. The buffer for this item shows a recent slowdown in demand — due to the inertia of the supply loop, we are a bit high, but it is self-correcting. Fortunately, we are adjusting this buffer based on historical demand, and in consumption-based pull flow. The forecast here is higher and would lead, especially in an MRP mode, to a much higher inventory fluctuation.

Chart that shows daily usage numbers for a sample item

You didn’t know anything about this item, and to tell you the truth, neither did I. However, we can explain its behavior, thanks to the visibility provided by Intuiflow’s demand driven software.

Of course, such a detailed analysis of an article will only be done on strategic products. To analyze the behavior of product portfolios, we will aggregate this visibility at a family level, and work by exception… This will be the subject of future articles, stay tuned!

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