Optimized Planning for an Explosive 4th of July
I love the 4th of July Holiday. As a kid, the 4th of July always represented the best of the summer school break and often included fun activities like camping, fishing, spending time in a park, parades, and wonderful firework displays. Of course there was always the abundance of kid friendly foods like hot dogs, hamburgers, popsicles, watermelon (and the ensuing watermelon seed spitting distance contest), salty chips of all kinds, and lots of sugary drinks. As a parent, watching your child experience the 4th makes the holiday even more special.
Most people don’t think about all the planning that needs to take place in the months leading up to the 4th to make sure everything is available to make the 4th a success. However, supply chain planners from thousands of different consumable and non-consumable consumer goods companies use past 4th of July demand trends to predict demand for their products for the upcoming 4th of July Holiday. Forecasts for everything from paper plates and plastic utensils, to charcoal and lighter fluid, to suntan lotion, to foods and drinks of all kinds and even the amount of gasoline available for summer trips are calculated. Procurement and manufacturing plans need to be created and executed based on these forecasts. The optimal positioning of products in the supply chain needs to be carefully planned to meet projected needs in each market and to quickly respond to unplanned demand and shortages as they occur. No small effort to ensure millions of children and parents have a memorable 4th of July.
Creating accurate forecasts for holiday demand using spreadsheets or basic forecasting capabilities available in ERP packages is almost impossible. The variability introduced by the day of the week the holiday falls on, and local factors like weather and fashions are difficult to model when using basic tools. Accurate forecasts for new products introduced since the last 4th of July are difficult to produce but critical because often these are the products with the highest margins. Advanced demand planning and sensing capabilities can account for timing variations while enabling accurate market projections by incorporating the latest local trends and social sentiment.
For many products, demand generated from holidays like the 4th of July, Memorial Day, & Labor Day represents a significant portion of total yearly sales. Short-term demand often outstrips short-term production capabilities requiring pre-building based on an extended forecast. Long-term forecast accuracy is critical for determining pre-build / pre-purchase inventory plans. Supply Chain Planning and Optimization Solutions help to determine when and from who to purchase materials and when and where to manufacture products to maximize customer service while minimizing total supply chain costs.
Sensing the latest trends at the market level including factors such as weather, fashion trends, and social sentiment for specific products will provide the information needed to ensure inventory is deployed to meet local demand. In many cases if your products are not available, the consumer will purchase competing products to meet their holiday needs. Multi-Echelon Inventory Optimization (MEIO) can be used to determine optimal inventory buffer locations and the quantities of each item to deploy at each location. The use of a MEIO to plan inventory requirements for holiday demand can increase accuracy of the initial market and store allocation and improve agility to respond to unexpected demand variations.
Next time you shop for your 4th of July holiday necessities stop and think about all the efforts by supply chain planning professionals to ensure you have everything you need to make your 4th one to remember.
Does your company have the supply chain planning and optimization capabilities you need to ensure successful holiday and event planning? Enjoy the 4th of July Holiday and I look forward to getting your feedback.
Fifteen years ago, I worked for a company that embraced Lean 6 Sigma as a core operating fundamental. Just about every member of the management team w