Supply Chain automation or how to automate supply chains

This article will focus on the predictive determination of the supply of inventory items to the network of bank front offices. Simply put, about the automated organization of the supply of departments with paper, stationery and other consumables.

This process is called auto-replenishment and consists of the following steps – forecasting the need in the supply center, placing an order in the same place, coordinating and adjusting the need by the retail block and directly supplying. The weak point here is the need for manual adjustment and subsequent coordination of the delivery volume by logistics managers and department heads.

Which stage in this chain can be optimized? During order formation, logistics managers calculate the quantity of goods to be delivered based on retro data, data on urgent orders and their expert experience. At the same time, department heads, in order to justify the need for certain goods, must track their consumption and understand the current stocks in the department. If we learn to determine the exact need for goods and automate this calculation, then the stages of order formation and adjustment will take much less time or even become completely unnecessary.

Consumption forecasting problem

There is a very similar and more common problem in retail: how many of which items should be delivered to store X at time Y? The problem is solved relatively simply: knowing the consumption of goods in time from checks and stocks of goods in the warehouse, you can calculate the future supply directly. You need to put as much as you are supposed to sell, minus the stock.

In our case, the consumption of goods is not directly recorded anywhere, because there are no analogues of receipts for consumables. There is also no inventory accounting – no one audits the available consumables. Thus, the task becomes much more complicated – there are no consumption and stock values.

Consumption estimate

Suppose that we are dealing with an ideal situation – supplies fully satisfy the needs of consumers: there are no stocks, they do not accumulate, and there is no shortage either, and all the need for consumables is covered by the supply. In this case, supply equals consumption.

Where to get consumption?

You can ask consumer objects to evaluate it. In this case, we fully rely on the accuracy of the expert assessments of employees and transfer control of the supply volume to the facilities. The disadvantages of this approach are obvious: expert assessments are often biased and overestimated. They also take up most of the work time of employees, require approvals, complicate and loop the process.

Another option is the introduction of conditional norms. For example, paper consumption norms, personal protective equipment consumption norms, etc. This approach also has disadvantages. Firstly, the rationing algorithms are simple and do not take into account many of the characteristics of consumers, as a result of which different consumers can receive the same amount of goods and materials and for each it will not be optimal – one will have an excess, and the other will have a lack of these values. Secondly, the norms almost do not change over time, which further exacerbates the effect of an excess or shortage of goods and materials: in the case of a large excess, overstocking occurs at the consumer facility, and in case of a shortage, the number of urgent orders for the supply of goods and materials increases. This is inefficient and expensive.

The third option is forecasting.

Stock valuation

Now let’s move on to a more realistic picture of what happens at the consumer facility in a situation where true consumption is unknown and there is a stock of inventory that changes over time.

If there is a stock, then it must be taken into account to determine the future supply. That is, one more quantity is added to the equation – J