dumay 11 hours ago | flag | on: Growth vs. Operational Excellence

As written in the article, you have to choose between two models when developing a startup : either grow at all costs, and optimize later (like Uber), or keep the notion of cost and frugality as an essential part of every initiative. Amazon is doing that in its warehouses : Grow, but make sure to optimize for efficiency.

On the other hand, groundbreaking innovations are often made possible by incremental innovations in other areas (such as the improved precision of steel machining tools allowing the creation of cost-efficient gasoline engines).

Hoehner 2 days ago | flag | on: Supply Chain News on news.lokad.com

A video explaining why this forum was launched.

While Reddit targets a young category of users and Wikipedia is bound to contain old and somewhat deprecated information, LinkedIn remains one of the only trustworthy source of information in the field, due to the experience of the professionals that are sharing their experiences. However, this information does not remain easily accessible after a while. Therefore, it would be interesting to have a place to discuss the specifics of the Supply Chain field.

For this purpose, Lokad has launched a new page called https://news.lokad.com/, an aggregator that consolidates interesting links to various Supply Chain topics and where the community can discuss and submit their own subjects. The final goal is to share links of interest for Supply Chain-minded people, giving them the chance to debate and contribute to further achievements in the field.

vermorel 4 days ago | flag | on: Software to simplify the supply chain

Interesting nuggets of this interview with Ryan Petersen, CEO of Flexport:

- 20% of the Flexport workforce is software engineering. The rest is sales and account management.
- The P95 transit time is a 95% quantile estimate of the transit time; part of the core Flexport promise.

Overall, a very interesting discussion, although the simplify part really refers to the Flexport product itself.

Most supply chain initiatives fail. Dead-ends are a given, although my understand differs a little bit concerning the root causes. Among the top offenders, the lack of decision-centric methodologies and technologies ranks very high. In the 'future' section proposed by the author, I see layers of processes to generate ever more numerical artifacts (eg: Market-driven Demand, Demand Visibility, Baseline Demand and Ongoing Analysis of Market Potential, Unified Data Model Tied to a Balanced Scorecard, Procurement/Buyers Workbench).

vermorel 4 days ago | flag | on: Made.com puts itself up for sale

A decade ago, Made.com - along with a couple of similar ecommerces - took extensive advantage of the payment terms of their oversea suppliers (mostly in Asia). Their supply chain execution allowed them to sell their goods while goods were still in-transit. This worked well for furniture as customers - at the time - were OK waiting a month or two to receive their order. I don't know where they stand now, but I suspect that the supply chain tensions (sourcing problems in Asia + surge of transport fees) do pose significant challenges to this business model.

tikhonov 1 weeks ago | flag | on: Stock is stock - whatever you call it [pic]

If we look at other fields we can realize safety stock will never get buried completely.
We have modern medicine, but healers still do exist.
We have modern agriculture, but growing 'organic' movement (which is in fact less sustainable).
Etc, etc, etc.
Those advocating for "supply chain is not for tech, but for people" will always seek for dysfunctional but simplistic recipes.

vermorel 1 weeks ago | flag | on: Stock is stock - whatever you call it [pic]

My previous take on safety stocks:

In short, not only the normal distribution assumption is bad, but the whole approach is very naïve. It made (somewhat) sense before the advent of computers, but at present, safety stocks should be treated as a method of historical interest only.

vermorel 2 weeks ago | flag | on: Differentiating Relational Queries

This work is done by Paul Peseux who is currently doing a PhD at Lokad. In terms of research, it's a convergence between machine learning, mathematical optimization and compiler design; fields that are usually considered as fairly distinct - but that end up being glued together in the context of differentiable programming.

Inflation pressure in Europe may not only be fueled by increased energy prices but in addition by increased logistics costs.

tikhonov 3 weeks ago | flag | on: Demand sensing [pic]

Fully agree. The only case which might be relevant for "real time" data is dynamic repricing for SKUs pending stock out or promotion/discounting within the day for perishable goods. This might be relevant for e-groceries and other e-commerce businesses with tight competition where they closely tracking each other and have overlapping highly substitutable assortment.
For replenishment and purchasing "real time" data is overkill and waste of compute power. Daily batches are enough.

richlubi 3 weeks ago | flag | on: Demand sensing [pic]

Demand sensing = marketing tosh; nothing new or clever . . . I can't see evidence to the contrary.

Not to say, of course, that there is no benefit in getting an earlier feed of data on something such as demand, if - and only if - it can result in a better decision that is executed earlier than otherwise - giving an economic benefit.

The use cases do exist though. My (real) example is in the supermarkets world, specifically on the day that a new set of weekly promotions start. On this 'day one' of the promotional week regular and promotional pricing are reset, promotional 'aisle ends' are built as well as other changes in layout being implemented. For all the forecasting that is done beforehand, the actual sales by 11:00 on the first day provide a very accurate view of how all the changes - overlayed with each other - are being interpreted by the customer, resulting in sales. This early read on sales - which is net of all the inter-SKU relationships - 'could' result in a different POs being placed with suppliers a day earlier than if the daily sales were interpreted in an overnight batch process. This 'could' result in availability and sales better in line with demand, and fewer overestimates/overstocks in store which are also negative in terms store productivity. The challenge in this example is not so much 'the software' but rather the data flow and the timing of the execution of the calculation (e.g. purchase order calculation), in line with other time windows that need to be hit in order to get a PO out a day earlier. In this sense there is no difference between 'real time' and 'timely' - e.g. a batch process is perfectly OK as long as it can be executed quickly and when you need it.

tikhonov 3 weeks ago | flag | on: Demand sensing [pic]

Probabilistic forecasting should be considered as state of the art for supply chain planning.
Though, as we recently have shown it is doable to explain supply chain decisions optimization with use of probabilistic forecasts (we explained it using purchasing decisions) even in Excel:
If there is a substance behind Demand sensing - looking forward to see the Excel with simplified approach showing what value this approach adds.

vermorel 3 weeks ago | flag | on: Demand sensing [pic]
impossible to get a real sense of what's offered without some sort of PoC

Fully agree. This is why I abhor those made-up terminologies: it's pure vendor shenanigan's.

StefJensen 3 weeks ago | flag | on: Demand sensing [pic]

The 'real-time' part is an overstatement for sure. What they offer are batch job controlled short term (deterministic) forecasting.
All these buzzwords in planning/forecasting software is just annoying as a customer - its absolutely impossible to get a real sense of what's offered without some sort of PoC. Because only then you start to have the talks that shows, what's under the hood.

tikhonov 3 weeks ago | flag | on: Demand sensing [pic]

Demand sensing article on Wikipedia:

Compare it with probabilistic forecasting for instance:

vermorel 3 weeks ago | flag | on: Demand sensing [pic]

Q: Why a new buzzword if it's about repackaging techniques that already have proper names?
A: Occam Razor: to make the tech appear more attractive and valuable than it really is.

According to [1], SAP recognizes 'demand sensing' as 'a forecasting method that leverages [...] near real-time information to create an accurate forecast of demand'.

  • Why would a 'near real time' provides a forecast that is any less accurate than a batch forecast happening with a lag of, say, 10min?
  • Why should gradient boosting be even considered as a relevant technical solution for 'near real-time' tasks?

Remove demand sensing from the picture, and you still have the exact same tech with the exact same processes.

[1] https://blogs.sap.com/2020/02/09/sap-integrated-business-planning-demand-sensing-functionality/

Hoehner 3 weeks ago | flag | on: The beer game

It would be cool to have a Lokad version of the beer game. I.e. focusing on the elements of the stock reward function https://docs.lokad.com/library/stock-reward-function/

vermorel 3 weeks ago | flag | on: Save The Supply Chain Leader From Groupthink
When I look at the market, I see major contributions of GroupThink:
- Failure of IT Standardization. SAP and IBM failed the market. The recent gains in market share of Kinaxis, o9, and OMP are largely due to the failure of SAP to drive thought leadership in planning.
- Private Equity M&A. Software mergers & acquisitions also slowed innovation. The technology roll-ups of INFOR, JDA (now BlueYonder), and E2open improved investors’ balance sheets, but did not drive value for their clients.
- Event Companies Are the Nemesis of the Industry. Event companies take large sums of money from technology companies and host events based on the Rolodex of a prior supply chain leader

A spot-on analysis. Low level IT standardization is moving forward nicely (think federated identity management), but it's not the case for high level IT (think workflows). The success of products like Tableau reflects that there is a major need to cope with the lack of standardization.

M&A in enterprise software is almost always resulting in large about of technological debt. It's very hard to get good software engineers motivated about clean-up millions of lines of code of haphazard codebases where stuff has just been "thrown together".

Event Companies are a severe form of epistemic corruption. I discussed the case in https://tv.lokad.com/journal/2021/3/31/adversarial-market-research-for-enterprise-software/

As it was suggested in https://news.lokad.com/posts/167/live-virtual-tours-of-amazon-fulfilment-centres, there is also the visit of Amazon warehouses in different countries

I tried visiting their American facilities, it was great!

Full text article https://archive.ph/wlCqS

Interesting, would be cool to have a collection of warehouse visits to give new professionals a better idea of what an actual warehouse looks like. I came across this one from Maersk https://www.youtube.com/watch?v=Qhcheew5kxU&ab_channel=Maersk

The sheer scale of this piece of engineering is incredible. We are talking of a machine that is 400m x 100m x 12m big. The whole thing maximizes that can be done in terms of inventory storage and inventory throughput while taking advantage of every cubic meter that is available.

Digital talent remains the Achille heel of many (most?) supply chain initiatives. Nonsensical tech decisions keep being made due to a lack of understanding of what is at stake. The challenges pointed out in this post a few years back have only become more acute since then.

tikhonov 4 weeks ago | flag | on: Probabilistic supply chain vision in Excel

Q5: There is a comment in the file recommending using this approach for educational purposes only, because such a forecast will be simplistic and will not account for seasonality or trends etc. How to use this approach beyond educational purposes for real inventory optimization problems?

A5: First, it should be noted that probabilistic forecasts in the file are synthetic probability distributions that are built using Excel functions.
It is possible to build probabilistic forecast that would be based on historical sales data and would take into account all systematic causes of variation like seasonality, trend etc.
We intentionally left it behind the scenes for two reasons:
1) We would have to provide historical sales data that probabilistic forecast would be based on. Here we have a problem that all users are from different industries and got accustomed to see different sales patters. We wanted to avoid "this doesn't look like my sales data" kind of impression.
2) Building production grade probabilistic forecast in Excel is technically speaking a nightmare and an open problem since we've never seen anybody done it so far. Taking into account Excel capability limitations it should be also very slow to rebuild the forecast once you update the data.
At Lokad we use domain specific programming language called Envision where probabilistic forecast can literally be build with several lines of code. Those who are interested about the procedure can play the recording of our past supply chain lecture:

tikhonov 4 weeks ago | flag | on: Probabilistic supply chain vision in Excel

Q4: Can this approach of decisions prioritization with expected ROI be used for allocating scarce products from DC to stores?

A4: Absolutely.
This file was about purchasing optimization, but the same approach could be applied for DC to stores dispatch problem. ROI ranking perfectly works when there is limited stock at DC and inventory manager wants to make sure that dispatch plan is optimal.
The way it works is the first unit of the first SKU (can be arbitrarily chosen, but can also start from top sellers) and ask in which store (given current stock in each store and probabilistic demand forecast for this SKU for each store) it will have the highest ROI and/or fill rate gain? Then you rinse and repeat for all SKUs at a unit level for all the units (same as with purchasing). This enables to best allocate the existent stock on hand across all the stores in the network. Ranking procedure here is a bit different because at every step we make final decision to which store we send Nth unit of a given SKU. At the end of the process after considering all micro level decisions we chose termination criteria (no more stock at DC or target ROI or target fill rate etc.) and aggregate numbers per store per SKU to get dispatch lists.

tikhonov 4 weeks ago | flag | on: Probabilistic supply chain vision in Excel

Q3: What goes into engineering economic drivers? How critical it is to get them right from the very beginning or is it more like learning curve?

A3: Decision making using economic drivers in combination with probabilistic forecasts to some extent imitates human level decision making process. Costs and revenues are straightforward, but the stock out cover is not. It is completely context dependent and can be called heuristics. This is where human intelligence lies. Having them properly set enables to automate decision making so that there is no more need to say split 500k SKUs among 50 demand planners to manage 10k SKUs each. All decisions for all SKUs can be generated automatically by the single numerical recipe. Litmus test here is simple - if demand planner sees no insanity in decision recommendations, then it should be concluded that economic drivers are production grade, but for sure can be fine tuned over time.

Interestingly enough the EU exports approximately 7 million metric tons per year https://legacy.trade.gov/steel/countries/pdfs/exports-eu.pdf - which is about 4% of the production - thus the demand/supply gap in Europe shouldn't be too significant in the short term.

EU steel plants suffer from weak demand and high energy costs, decreasing competitiveness of EU steel producers. Shut downs are across all EU countries. However, in comparison to 2022 the steel production is only reduced by 6.7%

The stochastic gradient descent (SGD) is used for a whole variety of supply chain problems from demand forecasting to pricing optimization. From a software performance perspective, the crux of the SGD problem is to increase the wall-clock rate of descent while preserving the determinism of the execution. Indeed, as far as parallelization is concerned, indeterminism is the default; it takes effort to achieve a reproducible flavor of the algorithm. The report introduces a technique that delivers a 5x speed-up at a 6x increase of compute costs.

10 years is a good ballpark assessment to produce a good software product - assuming there are people who will stick around for a decade to see it through. See https://www.joelonsoftware.com/2001/07/21/good-software-takes-ten-years-get-used-to-it/ Written 20 years ago, but the points are still largely valid.

Acknowledgement from that the probabilistic approach is superior, or at least will offer more resilient decisions. How long to get to market in a core product that actually works? 10 years?

vermorel 4 weeks ago | flag | on: Conformal prediction materials

Conformal predictions are one of the flavor of probabilistic forecasting, leaning toward high dimensional situations. This repository is an extensive compilation of the papers, phds and open source toolkits that are available for conformal predictions.

The blog post talks about range forecasts and probabilistic forecasts. Also they talk about relatively small number of scenarios ("at least 5-10...") so it brings the question of accuracy with such small resolution.
Feasible decisions ranking and economic drivers are absent while they are essential components for choosing decisions with highest return on investment.
Level of details is underwhelming so far.
Though this is great news. They will definitely accelerate the adoption of the term.

We strongly believe that probabilistic methods play a key role in the future of supply chain planning. They represent the right way to go for areas that contain uncertainty, including for all types of forecasting and the subsequent planning situations.
Traditional deterministic planning methods base their decisions on the mistaken assumption that uncertain values can be approximated by a single average number. As a direct consequence of this assumption, plans are often infeasible at the time they are created and manual interventions are continuously needed.

Better late than never! However, let's immediately point out that the SAP IBP architecture is very much hostile to probabilistic modeling. More specifically, the high memory consumption of HANA is going to add some massive overhead on top of methods that not exactly lightweight in the first place.

tikhonov 4 weeks ago | flag | on: Proxy Variable [pic]

Another metric of this kind would be stock levels expressed in dollar value or in days of sales. Very easy to cut and show "benefits", especially if you are in long lead time business. Cut them, update your CV and make diagonal jump to another business. Profit :)

vermorel 4 weeks ago | flag | on: Proxy Variable [pic]

Service levels are probably the favorite proxy variable in supply chain. Supply chain textbooks and consultants assume that "finely tuned service levels" automatically translate into better outcomes for the company, while those service levels say very little of substance about the quality of service actually perceived by customers.

arkadir 4 weeks ago | flag | on: Proxy Variable [pic]

It's tempting to solve an easier problem only superficially related to the actual problem.

One of the ways bureaucracies are ignoring difficult problems is by division of labor. Once the scope of the problem is broken up across multiple roles it becomes nobody's business. Calling cross-functional teams to rescue the business is not a solution as usually those teams are composed of multiple within-silo thinkers who can't abstract from their role and look at the problem as a whole.

dumay 4 weeks ago | flag | on: Live virtual tours of Amazon Fulfilment centres

I had the chance to do a guided tour yesterday evening, for their American facilities. It was great! I was surprised to be (almost) the only one asking questions. They took the time to answer all of them, not very extensively I acknowledge but the effort was there. I would love to visit their French warehouses now.

Supply chains are complex systems. It's maddeningly difficult to solve problems rather than displacing them. When confronted with incredibly difficult problems, bureaucracies are also incredibly good at ignoring them altogether. In supply chain, big problems are usually big enough to take care of themselves.

How far should we go to say that we have reached a point of say realistic representation of an agent? Also when we say accuracy , what does it really mean?

Right now, as far as my understanding of the supply chain literature goes, there is just nothing yet published to tell you whether a simulation - in the general case - is accurate or not. The tool we have for time-series forecast don't generalize properly to higher dimensional settings.

For example, if a simulator of a multi-echelon supply chain of interest is implemented, and then someone decide to refine of the model of some inner agent within the simulator, there is no metric that are even known to be able to tell you if this refinement is making the simulator more accurate of not.

Stay tuned, I am planning a lecture on the subject in the future, it's a big tough question.

Thanks Joannes, would it make sense to have more intelligent agent behavior? How far should we go to say that we have reached a point of say realistic representation of an agent? Also when we say accuracy , what does it really mean? Is it like ,say , we predicted something up or down and we are correct 90 times out of 100 so our accuracy is 90%?

Holy, surprisingly its popular in south korea which was unexpected for me.

Hoehner 5 weeks ago | flag | on: Live reporting of Port congestions

Interesting to see that that the major congestions that were deemed to create backlog for all 2022 have mostly vanished

Lokad tries to push a lot of (hopefully) quality supply chain materials in the open. Unlike many vendors, we don't attempt to shroud our technology in a veil of mystery. However, we need backup. If you think that you help us produce videos, guides, articles ... then, drop your resume at j.vermorel@lokad.com

tikhonov 5 weeks ago | flag | on: Probabilistic supply chain vision in Excel

Q2: After we made and executed purchasing decision there is no more uncertainty, then how would we evaluate whether the predicted probability forecast is the correct one?

A2: Even after we made and executed the decision in reality there is still uncertainty. We don't know when our order will be received because lead time is also probabilistic. Quality of goods can be probabilistic as well (consider fresh food for instance). Also we will not be able to estimate accuracy of our probabilistic demand forecast until the responsibility window (over which we built probabilistic forecast) becomes the past.
With respect to the metrics that are used for probabilistic forecast quality assessment you can check this lecture:


Use time stamps to watch the lecture parts where the metrics were discussed.

Answering a question on YouTube:

As per my understanding the following are the core concerns -
1) Accuracy
2) Doesn't necessarily represent reality based on Agent behaviour
3) Gives me insights, ok now what should i do? Don't give me numbers, tell me what to do. If an employee sits down and tweaks parameters then how do i make sense if the decision is correct?

Yes, in short, the two big gotchas are (a) your digital twin may no reflect the reality (b) your digital twin may not be prescriptive.

Concerning (a), measuring accuracy when considering the modeling of a system turns out to be a difficult problem. I intend to revisit the case in my series of supply chain lectures, but it's nontrivial, and so far all the vendors seem to be sweeping the dust under the rug.

Concerning (b), if all the digital twin delivers are metrics, then, it's just an elaborate way to waste employee's time, and thus money. Merely presenting metrics to employees is suspicious if there is no immediate call-to-call. If there is a call-to-action, then let's take it further and automate the whole thing.

tikhonov 5 weeks ago | flag | on: Probabilistic supply chain vision in Excel

This is brief summary of my Q&A with one of the users of Excel file. I will provide each question and answer as separate comment.

Q1: How are we creating the probability distributions for the products in this file? If I have historical sales data for a particular SKU, how should I get the probability distribution for that?

A1: We haven't made capabilities to build probabilistic demand forecasts using historical data in this Excel file. This is very hard to implement in Excel due to its limitations. Programming language like Envision is more appropriate for that, but one could also use Python or any other language. How to build Probabilistic forecast with historical data was discussed in this lecture:


This file uses synthetic distributions via built-in Excel functions for normal and negative binomial distributions. Changing parameters you can change the distributions and the ranking of micro level decisions respectively. This is educational tool and the primary goal was to show how having probabilistic demand forecast and economic drivers demand planer can optimize purchasing decisions.
Though, the question of building probabilistic forecast based on historical data still remains valid. It is just not in the scope of this document because it is harder to understand, but also harder to explain and show through Excel.

Indeed. Although, as aircrafts get dismantled, it tends to introduce a lot of spare parts into the market. Thus, most of the time, the parts of weaning aircraft types become cheaper despite the lack of production of parts. However, as you correctly point out, there are parts that become rare and very expensive, making the aircraft type economically unviable.

Making noise and making money out of the noise, especially consistently, is not the same. I think that growing number of companies that adopt probabilistic perspective through appropriate software is the only adequate metric that tells anything about the adoption of the term.

That's is interesting. At some point there will be very few aircrafts of this model so servicing parts for them will become nightmarish as demand will be even more sparse than it is now meaning the parts rotation will slow down and carrying cost at some point will make it unprofitable for those remaining aircrafts to fly.

A nice illustration the sort of stuff that characterizes aviation supply chain: aircrafts are both expensive and modular. Thus, the option is always on the table to take a component from an aircraft and move it to another aircraft. Most of time, exercising this option is pointless, but sometimes, it's an economically viable move. Here, this is what Boeing is doing with aircraft engines. Aviation supply chains are not about picking safety stocks :-)

Working in the probabilistic space, it feels that the term is becoming more and more mainstream and anecdotal evidence confirms that. However, looking at google searches this is not at all confirmed. Maybe the topic isn't as mainstream as we feel - confirmation bias? https://www.lokad.com/probabilistic-forecasting

Funfact: Since 2012 the interest for the topic has x 100


Fun fact: Lokad started to implement digital twins of supply chains more than a decade ago; although I don't overly like this terminology. As a rule of thumb, I tend to dislike terminologies that try to make tech sounds cool, irrespectively of the merit of said technology. There are tons of challenges associated with large scale modeling of supply chain, the first one being: how accurate is my digital twin? Tech vendors are usually exceedingly quite about this essential question.

747 have been produced for 54 years. The one most notable evolution being the introduction of the fly-by-wire tech in the 1990s

This plane has massively contributed to the democratization of both air travel and air shipments. Considering that aircrafts are typically operated for decades, some 747 are likely to keep flying for the next 20/30 years.

Lion Hirth is Professor of Energy Policy at the Hertie School. His research interests lie in the economics of wind and solar power, energy policy instruments and electricity market design.

The document introduce marginal pricing - in the context of energy, and make three statements about it:

Marginal pricing is not unique to power markets.
Marginal pricing is not an artificial rule.
If you want to get rid of marginal pricing, you must force people to change their behavior

Three points are very much aligned with what is generally understood as mainstream economics. Those points are quite general and do apply to most supply chains as well.

I am not familiar with the specific Greek energy market.

However from a supply-and-demand perspective,

  • Intermittent energy sources do not meet the Quality of Service requirement which is essential for energy.
  • As long as the source can be turned into electricity, all energy sources are near perfect substitutes. Hence, one cannot isolate the price of a selection of sources vs the rest.
  • When demand is inelastic and grows, as it is the case for energy demand, it's the supply that has to grow.

Due to spiking electricity prices several stakeholders are arguing that the electricity market is malfunctioning and the pricing mechanism is flawed. The merit order model, that attributes the marginal (highest production price) to all producers is nothing else than the offer/demand model that we apply in all other markets as well.

vermorel 5 weeks ago | flag | on: Lokad is hiring a Supply Chain Scientist
The Supply Chain Scientist delivers human intelligence magnified through machine intelligence . The smart automation of the supply chain decisions is the end product of the work done by the Supply Chain Scientist.

Excerpt from 'The Supply Chain Scientist' at

Transit costs to low orbit are still beyond the realm of supply chain, however, it is notable the cost per kilogram has been going down by a factor 1000 over the course of 70 years. If progress keeps happening at the same pace, in a few decades, launches will become an option. The benefits of easier access to low orbit are somewhat unclear beyond telecommunications, but specialized micro-gravity factories has been explored many time in science fiction. At this point, orbit remains too expensive to even try to investigate newer / better industrial processes in orbit.

vermorel 5 weeks ago | flag | on: How to Measure Forecastability (2021)

The only way to assess "forecastability" of a time-series is to use a forecasting model as a baseline. This is exactly what is done in the article, but unfortunately, it means that if the baseline model is poor, the "forecastability" assessment is going to be poor as well. There is no work-around that.

Stepping back, one of the things that I have learned more than a decade ago at Lokad is that all the forecasting metrics are moot unless they are connected to euros or dollars attached to tangible supply chain decisions. This is true for deterministic and probabilistic forecasts alike, although, the problem becomes more apparent when probabilistic forecasts are used.

StefJensen 5 weeks ago | flag | on: How to Measure Forecastability (2021)

Many articles discuss how to measure forecastability for deterministic forecasting. However alot for in the trap of suggesting to simply use a coefficient of variation (CV) measure - even though it will count forecastable patterns as season and trend as variation and therefore mistakenly set them as hard to forecast.

The linked article here by Stefan de Kok does a good job of explaining the trap of pure CV and come with an alternative.

I'm a bit split though whether to use this type of measure or to compute the FAA of a simple benchmark (such as a moving average).
The FAA gives you a minimum acceptable accuracy level, but the proposed method here gives a measure which (typically) can be reported from 0 (unforecastable) to 1 (no noise).

Do any of you here have experience in implementing this and can share any experiences? Especially on the stakeholder/change management side.

Be our guest, virtually! These live, one-hour tours take you behind the scenes at our fulfilment centres, using a combination of live streaming, videos, 360° footage, and real-time Q&A to replicate the experience of our in-person tours.
Live virtual tours are approximately 1 hour long, including Q&A.
Registration closes 6 hours in advance of each tour. Last-minute registration ("instant join") is not possible. Tours will no longer appear in the calendar once registration is closed, or when they are fully booked.

Various options are available depending on the region of interest:

tikhonov 5 weeks ago | flag | on: Adequate decision policy is the way [pic]

I have seen this so many times while working in FMCGs. Some people made that with multiple companies in sequence and landed CXO positions.

vermorel 5 weeks ago | flag | on: Adequate decision policy is the way [pic]

Steps for the new supply chain decision systems:

  • Pick expensive consultants to devise a 100 pages RFP. Gather all requirements, especially the imaginary ones.
  • Select 20 vendors, shortlist 2 ultra-expensive big names plus 1 cheap startup (they won't make it to the final round, but those guys are more fun to talk to)
  • Pick the big name vendor that has the most features. An excess of 1000 screens is desirable.
  • Plug the latest bleeding edge AI toolkit. The important part is the "bleeding" part, that's a sign of real innovation.
  • Customize all UIs so that everything becomes collaborative. Numbers were bad before, but now, it costs a fortune to produce them.
  • After 6 months, declare the initiative a success, and change job immediately afterward.

Simple, really.

tikhonov 5 weeks ago | flag | on: It's Friday. Test your addition skills :)

Looks easy-peasy. Where did they found so many well educated people who can't add numbers?

tikhonov 5 weeks ago | flag | on: It's Friday. Test your addition skills :)

Let's show that supply chain practitioners can add.
Post your result in comment like X-X-X-X where X is either 0 or 1, where 0 means incorrect answer and 1 - correct one. So 1-1-0-0 would mean that only first and second questions were correctly answered.

vermorel 5 weeks ago | flag | on: Future-proof your supply chain

The article proposes three ways, namely:

Building supply chain resilience by managing risk
Using technology to increase supply chain agility
Identifying and promoting ways to be more sustainable

However, the analysis is a bit all over the place.

  • For risk management, the example of RFID at Nike is given. However, RFID has nothing to with with risk management at the supply chain level.
  • For supply chain agility, the example (which features a plug for a planning software vendor) of AI / ML, is a double-edged sword. Historically, software has been a great force to rigidify systems, lowering their operating costs, but usually making them less agile too.
  • For sustainability, frankly, this is pure virtue-signal, both from the article itself, and from the respondent of the survey. I am not saying that sustainability isn't a worthy goal, however, very companies are in any position to do much on this front as far as their supply chain is concerned.

Afaik, those types of ships are typically referred to as bulk carriers

A bulk carrier or bulker is a merchant ship specially designed to transport unpackaged bulk cargo — such as grains, coal, ore, steel coils, and cement — in its cargo holds.

From https://en.wikipedia.org/wiki/Bulk_carrier

The interesting element is the extra option that COSCO gains by being able to leverage one extra type of ship. This method is probably inferior cost-wise to regular containers, but if a bulk carrier is the only ship that happens to be available, then, it becomes very valuable to have the option.

vermorel 6 weeks ago | flag | on: How to calculate true demand (2021)

The post points out that competing a "demand" needs to factor-in the delivery date (requested) vs the shipped date (realized). However, I am afraid, this is a very thin contribution.

Demand is an incredibly multi-faceted topic. Demand is never observed. Only sales, or sales intents are observed. The sales are conditioned by many (many) factors that distort the perception of the demand.

First, let's start with the easy ones, the factors that simply censor your perception of the demand:

  • No having the right product to sell. The sales never happen, yet, demand was there.
  • Not having the right price. Idem, demand exists, just not for this price.
  • Not having the right position (bad image, bad description). Visitors miss what they could have wanted.
  • Not having the right delivery promise. Visitors give up if out-of-stock or if delivery date is too far away.

Then, we have all the big factors:

  • Say's law: Supply creates its own demand, demand isn't prexisting, it's engineered as such.
  • Branding: take two physically identically product plus/minus the brand, demand changes entirely.
  • Cannibalizations and substitutions: demand covers a whole spectrum of willingness to buy. Demand cannot be understood at the product level.
  • etc

Looking at the demand through the lenses of time-series analysis is short-sighted.

Ps: thanks a lot for being one of the first SCN contributors!

I think Lokad's supply chain lectures are an excellent source. They are all available on YouTube.
MIT offers a MicroMasters in Supply Chain Management through the edX platform. I haven't taken any of those courses, but maybe you can find something interesting in the syllabus. They are free and you can have the option of earning a certificate for a small fee if you complete all the requierements. This program can be half of the on-campus Supply Chain Management master's program.
Maybe someone that has taken this program can comment and tell us if it is worth it?

dumay 6 weeks ago | flag | on: The beer game

I had the chance to play it at university (it was very chaotic!). It was a session on "bullwhip effect".

In 2011 Lidl made the decision to replace its homegrown legacy system “Wawi” with a new solution based on “SAP for Retail, powered by HANA”. [..] Key figure analyzes and forecasts should be available in real time. In addition, Lidl hoped for more efficient processes and easier handling of master data for the more than 10,000 stores and over 140 logistics centers.
The problems arose when Lidl discovered that the SAP system based it's inventory on retail prices, where Lidl was used to do that based on purchase prices. Lidl refused to change both her mindset and processes and decided to customise the software. That was the beginning of the end.

Disclaimer: Lokad competes with SAP on the inventory optimization front.

My take is that the SAP tech suffered from two non-recoverable design issues.

First, HANA has excessive needs of computer resources, especially memory. This is usually the case with in-memory designs, but HANA seems to be one of the worst offenders (see [1]). This adds an enormous amount of mundane friction. At the scale of Lidl, this sort of friction becomes very unforgiving - every minor glitches turning into many-hours (sometime multi-days) fixes.

Second, when operating at the supply chain analytical layer, complete customization is a necessity. There is no such thing as "standard" decision taking algorithm to drive a replenishment system moving billions of Euros worth of good per year. This insights goes very much against most of design choices which have been made in SAP. Customization shouldn't be the enemy.

[1] https://www.brightworkresearch.com/how-hana-takes-30-to-40-times-the-memory-of-other-databases/

vermorel 6 weeks ago | flag | on: Probabilistic supply chain vision in Excel

This spreadsheet contains a prioritized inventory replenishment logic based on a probabilistic demand forecast. It illustrates how SKUs compete for the same budget when it comes to the improvement of the service levels while keeping the amount of inventory under control. A lot of in-sheet explanations are provided so that the logic can be understood by practitioners.

tikhonov 6 weeks ago | flag | on: Probabilistic supply chain vision in Excel

Excel is the Swiss army's knife of any supply chain practitioner. While it is definitely not the most appropriate tool for managing supply chain it is important to be able to convey ideas through it. Lokad tried to build simplified educational version of decisions optimization with probabilistic forecasts in Excel. See the LinkedIn post by the link.
You can ask to receive the file in the comments either here or on LinkedIn under the post.

vermorel 6 weeks ago | flag | on: The beer game

This is a nice readily accessible implementation, no sign-up, no login, create a new game and play. For those who are not familiar with the beer game, it's 4 stage supply chain game with 4 roles: manufacturer, distributor, supplier, retailer. Each player fills a role, and tries to keep the right amount of goods flowing around. It's a nice - and somewhat brutal - way to experience a fair dose of bullwhip. If you don't have 3 friends readily available, the computer will play the other 3 roles.

Ps: I never got the chance to experience this game at university. If some people did, I would love to hear about their experience - as students - of their first 'Beer game'.

StefJensen 6 weeks ago | flag | on: The beer game

Online version of the beer game, allowing multiplayer or computer controlled

2 years are a long way in ML.

These days CV models can handle trivial tasks like barcode recognition in near real-time even on commodity smartphones. Mostly thanks to the dedicated hardware like neural engines/tensor blocks etc.

Since vision is quite popular these days (cameras, AR/VR etc), things should progress even more quickly on the hardware front these days. E.g. building more affordable robotic assistants for the warehouse that are procured from cheaper parts but minor inefficiencies in the gear drives and motors are compensated by the software. This is similar to what Ocado Group has been aiming for when they acquired HaddingtonDynamics for their tech.

Also NVidia Omniverse, as a bet for creating digital twins for the reinforcement learning.

It looks like climate change effects on economics might be accelerated in the mid term. E.g. exceptionally dry summer in Europe alone wouldn't be that bad for the supply, but war in Ukraine and imbalance of supply chains that started 2020 - it all adds up.

Impossible to predict the future in this situation, but at least the actors could try to manage their risks across a range of future probabilities.

dumay 6 weeks ago | flag | on: Supply Chain Rhapsody [video] (2019)

With all the opaque vocabulary you're dreaming of!
Sometimes I think of my professors always repeating "If you can explain it to your little siblings and answer all their questions then you understood it!" Who could do that with all the vocabulary used in the video?

The TSP is definitely a problem we encounter (almost) every day... With countless variants!

According to this paper https://www.researchgate.net/publication/337198743_A_comparative_analysis_of_the_travelling_salesman_problem_Exact_and_machine_learning_techniques, Google's tool seems pretty robust! I'd really like to give it a try when I need it.

For those wondering about this VizPick technology, there is a short video demo from two years ago at

The UX isn't perfectly smooth. You can feel the latency of the recognition software. Also, the operator has to move relatively slowly to give a chance to the acquired digital image to stabilize. However, it still beats the human perception by a sizeable margin.

vermorel 6 weeks ago | flag | on: Launching Supply Chain News

Thanks and welcome! Don't hesitate to submit a link of your own, and/or to post a question. You will benefit from an extra level of care being on of the first non-Lokad contributors. :-)

richlubi 6 weeks ago | flag | on: Launching Supply Chain News

I am looking forward to some good discussions here.

Unfortunately, S&OP processes - at the very least those I had the chance to observe in my career - had already devolved into tedious iterated sandbagging exercises, exclusively moving targets up or down without - ever - touching any actual decision. Yet, the insight remains correct, without putting the decision front and center, it devolves into idle speculations about the future.

That's a bit like the S&OP Process in general : it should be based on the important decision you need to take and those decisions only.

arkadir 6 weeks ago | flag | on: Launching Supply Chain News

It is often the case in software that deciding on a solution based on a checklist of features leads to feature bloat. Picking a few core features, and wrapping them in a system that allows easy customization, is quite more effective.

vermorel 6 weeks ago | flag | on: Launching Supply Chain News

Side story: this discussion board has been a long-time project of mine. For years I have been looking for a minimalistic discussion board, but all I could find was bloated pieces of software that did 10x what I wanted, and were missing the few things I cared about - like mathematical notations, (hey, have a look at my EOQ, $Q=\sqrt{\frac{2c_l\cdot k}{c_s}}$). More recently, the big platforms started doubling down on both fact checking - as if such a thing was possible when operating platforms that discuss everything and the rest - and monetization. Both being quite toxic to healthy open discussions. This renewed my sense of urgency for this project.

Yet, I believe that an online community does require neither a big platform to operate, not a heavy handed moderation policy. As long you don't have to deal with millions of users, a few careful design decisions can alleviate the bulk of the usual problems that plague online communities (spamming, trolling, brigading).

About 10 days ago, I started actually working on the Supply Chain News project. For the tech-inclined, I have implemented this webapp in C# / .NET 6 / ASP.NET with minimal amount of JS. The persistence is performed via Lokad.AzureEventStream, an open source project of Lokad. I might open source this very forum at some point, once the webapp is a little more battle tested.

A system is a whole that contains two or more parts, each of which can affect the properties or behavior of the whole [..]. The second requirement of the parts of a system is that none of them has an independent effect on the whole. How any part affects the whole depends on what other parts are doing. [..] A system is a whole that cannot be divided into independent parts.

Supply chain is a system, in the purest sense as defined by Russell Ackoff. Approaching supply chains through systems thinking is critical to not entirely miss the point. Most practitioners do it instinctively. However, most academic treatments of the supply chain entirely miss the point.

There are three different ways of treating a problem. One is absolution. That's the way we trust most problems. You ignore it and you hope it'll go away or solve itself. [..] Problem resolution is a way of treating a problem where you dip into the past and say what have we done in the past that suggest we can do in the present that would be good enough. [..] There is something better to do a problem than solving it and it's dissolving it [..] by redesigning the system that has it so that the problem no longer exits.

Dissolving problems is incredibly powerful. A decade ago, Lokad (mostly) dissolved the forecasting accuracy problem through probabilistic forecasting. Instead of struggling with inaccurate forecasts we embraced the irreducible uncertainty of the future, hence mostly dissolving the accuracy problem (not entirely, but to a large extend).

late 15c., "any small charge over freight cost, payable by owners of goods to the master of a ship for his care of the goods," also "financial loss incurred through damage to goods in transit," from French avarie "damage to ship," and Italian avaria.

Supply chain has been shaping the terminology of mathematics.

The M5 forecasting competition was notable on several fronts:

  • It uses a sizeable real-world store-level sales dataset provided by Walmart. With 40k SKUs, it is - to date - the largest publicly assessible dataset for retail sales data.
  • It features a probabilistic perspective letting the participants compete over a series quantile estimates. To date, it's the only forecasting competition featuring a non-average non-median scoring criterion.
  • With 1,137 participants, it was very sizeable event. To date, I don't know any other forecasting competition that did even approach this level of participation.

The findings are not overly surprising: gradient boosted trees and deep learning models - which dominate the vast majority of the Kaggle competitions - end-up dominating the M5 as well.

Caveat emptor, those models are quite dramatically greedy in terms of computing resources. For a retail network of the scale of Walmart, I would not recommend those classes of machine learning models.

vermorel 6 weeks ago | flag | on: Supply Chain Rhapsody [video] (2019)

This video has ~47k at the time of the comment which is a shame, because this video is pure gold.

Brands have long known the power of the Made In Your Country sticker. It seems that the practice is over 4000 years old

The Librem example is striking because they literally quantify the extra willingness to pay of their clients to benefit from the right country of origin.

arkadir 6 weeks ago | flag | on: France Can’t Cut The Mustard

I've seen several retailers completely give up on mustard. Rather than have an empty mustard section (with a paper explaining the situation), there is no mustard section anymore, the available space taken by enlarged mayonnaise and vinaigrette sections.


Someone invented an animated QR-code format. If you film the animation long enough, you can download an arbitrarily large file.

For another discussion about the bullwhip effect, check this discussion with Prof. Stephen Disney (University of Exeter):

More generally, I am trying to consolidate a whole series of lectures about SCM that you can see at: