skip to Main Content

Demand Planning & Inventory Management: It is everywhere … I can’t escape it!

Supply Chain Planning  
09/11/2009
I was having lunch at a Bagel shop in downtown Lake Forest, IL yesterday.  I was enjoying my sandwich and looking at the glass display case full of bagels, cookies, and such.  The bountiful display did get my attention and everything looked good.

Then the Supply Chain weenie in me took over.  I wondered how many bagels, cakes, and cookies were left over each night.  What did they do with these goods?  Baked goods are really only salable the day they are baked and as these items were sitting in open air displays and not packaged, they literally have a one day shelf life.  Did they throw them out?  Do they donate them?  How much excess did a store like this end up with each day?

Then I saw a couple of employees, John, the manager with clipboard in hand, and the counter lady who made my sandwich, counting the bagels.  My passing interest turned a bit more serious.  How often were they counting the bagels?  How did they use the data for that day?  Was this for establishing trends?  I finished my sandwich and spent a few minutes talking to John.  I had so many questions for him; here is a summary of our discussion.

What do you do with all the leftovers at the end of the day?  John said that he hated to throw out food but would if there were no other choice.  There were a few charities that happily take the excess but they are not always available to make a pick-up.  When they are not, they toss the goods into the trash.

How do you decide what to make, when, and how much?  The bagel shop initiated a tally sheet count method, done hourly to track the sale of each SKU.  John then decides what to make and how much.  He pointed to a five cheese bagel.  He only sells four or five of these a day.  His batch size for this bagel and many others was one.  Next time I am there I am going to have to get a tour of their kitchen and pantry.

It sounds like a good system:  John did like the system, yet he talked about the variation in demand and random spikes.  For example, today was a Thursday and Thursdays are usually very good.  But, it was a nice day and people were simply not coming into the store.  The random spikes are when sports teams from the nearby high school or recreation teams descend on the shop.  They can completely wipe out the inventory on hand which, as in any business, is a good thing (a spike in sales) and then a bad thing (as we scurry to replenish).

Bakery shops like to have a bountiful look behind the glass at all times:  John confirmed this was part of the stores policy and it is designed to have both a good look and availability of the entire menu all day.  I told John about a corner bakery when I was growing up in Detroit.  It was family owned.  They did all their baking in the morning before opening the store.  That became their inventory for the day.  They would prefer to sell out of everything, but not too early.  Excess at the end of the day went into the day old bin at 50-75% cost reduction.  Anything in the day old bin was tossed at the end of the day.

John said several times in our short conversation that it was hard to predict the future.  I nodded knowingly but thinking “wow… his planning horizon is an hour and he has the same frustration many of us have planning the next month.”

Related Articles

Supply Chain Planning in the Face of Rapid Change

There’s little that could properly prepare the world for the magnitude of global events such as the COVID-19 global pandemic. These situations not only impact us as individuals, but often highlight critical vulnerabilities in our business processes. Supply chain planning [...]

Demand and Supply Planning in Unpredictable Times

With everyone’s health a top priority due to Covid-19, we’re facing unprecedented times, and in many cases flying by the seat of our pants to maintain as much normalcy for ourselves and our families as possible. Now enter the workforce, [...]

How you can implement automation without going totally digital

Going completely digital is a big step that not every business is ready for. That’s alright! There are still smaller steps that can move you in that direction. Manufacturing.net said, “Starting small with workflow automation allows organizations to streamline simple [...]

Your business growth could be hiding in supply chain

78% of the businesses studied were missing significant opportunities in their supply chain. Accenture said, “The remaining 22% of companies, referred to as “Leaders,” are making smart moves in three areas — digital investments, customer-centricity and ecosystems. This is enabling [...]

One number forecasting or number one attitude?

Are you focused on one number forecasting? Some companies swear by it while others take a different approach. The Institute of Business Forecasting & Planning said, “The idea is that a one number forecast creates alignment and that the whole [...]

Seven Advantages of Integrated Demand and Supply Planning

A championship football team reaches such heights because of teamwork, practice, and a clear strategy.  Both offensively and defensively, team members are drilled over and over to work together and know the plan so that on game day, everyone is [...]

Differences between correlation and causation

Just because you see patterns doesn’t mean you should make your business decisions around them. It’s easy to find connections and mix up the two, there are even some articles that confuse correlation and causation. Do your research and don’t [...]

6 Reasons to Avoid Using Spreadsheets for Supply Chain Planning

First introduced to the business world in the late 1970’s as a computerized representation of bookkeeping worksheets, spreadsheet software has become a staple in almost every office. Used in a wide variety of industries from manufacturing to retailing to professional [...]

Demand Planning vs. Supply Planning: Balance is the Key to Success

Organizations that manage a supply chain have a number of priorities that need to be continually balanced: meeting financial goals, completing customer orders on time and in full, and keeping facilities at optimal productivity levels, to name just a few. [...]

What is CPFR in supply chain?

CPFR stands for collaborative planning, forecasting, and replenishment. The Institute of Business Forecasting and Planning said, “CPFR strategies allow aligning of multiple S&OP processes and jointly plan supply chain activities to ensure that the joint business plans between organizations are [...]
Subscribe to our Blog
Back To Top