6 Replies Latest reply: Jan 9, 2013 3:43 AM by sorin teleptean RSS

Forecasting

Kevin Dennis Newbie
Currently Being Moderated

I have recently been tasked with forecasting being a part of the supply chain group. Although I enthusiastically accepted the process and responsibility a number of my staff were clearly taken aback by this because most everyone including myself have always seen it reside in the functional area of Sales and Marketing.  It evolved to this point because supply chain owns the inventory value, and service levels therefore my thinking is if we own the inventory and service levels already then what goes into the demand planning side should be managed by supply chain.

 

I would like to know if anyone has had similar experiences or if supply chain currently owns forecasting and how it is managed.  Thank you.

 

Kevin Dennis

  • Re: Forecasting
    Gaurav Goyal Newbie
    Currently Being Moderated

    How can supply chain have better product/market knowledge than sales & marketing?

     

    Regards

    Gaurav

  • Re: Forecasting
    Harvey Justmann Newbie
    Currently Being Moderated

    It is my opinion that the implementation and results of forecasting should fall under the Supply Chain responsibilities.

     

    HOWEVER, there are many types/ways to forecast.  I beleive it is a must to include all stakeholders (the sales and marketing departments, accounting/cashflow department, and the customers)  to have input and resulting buy-in during the planning stages of a Company's forecast.  The forecasts must be monitorored throughought the year as changes in the market demand are likely to occur.  One-team is the best team, with Supply Chain department as the leader' and charged with it's ultimate success or failure.

     

    Harvey Justmann

    Supply Chain Professonal

    hjustmann@sbcglobal.net

     

    Professional Logo jpeg.doc

  • Re: Forecasting
    Luis Cabrera Newbie
    Currently Being Moderated

    Hi Kevin,

     

    I have attached a document explaining step by step about forecasting, demand planning and inventory management.

    Forecasting belongs to Supply Chain Management, but you have to be technically oriented to understand the techniques,

    and the planning process of it, otherwise you will fall into the field of speculation, guessing and hot air talk, regards ....Luis

  • Re: Forecasting
    Harvey Justmann Newbie
    Currently Being Moderated

    Hi Kevin,

     

      As a former business owner and someone who has managed most every link in the Supply Chain over the last 20+, I would like to share my thoughts on your topic.

     

    In my opinion Forecasting is the single most important piece of business planning and executuion during the 12-month fiscal year.  It is my belief that while Forecasting should be a collaborative effort of the Sales, Marketing, and Supply Chain Managers, it is the SC Manager's responsibility to take the lead role and be accountable for having the correct products arrivie at the approriate time with good quality and reasonable profit.  Sales and Marketing must buy in to the plan to ensure its success.

     

    There are many different types and models of Forecasting. It is my belief that THE most important element of the Forecast is the review of the actual Monthly Sales figures, available on-hand inventory, work in progress and product on the water, as they compare to the original plan.  Each month (or quarter) it may likely be necessary to make adjustments to the Forecast as needed to end the year as successfully as possible.

     

    No one is more aware of production problems, schedules, quality, changing costs, and on-hand inventory than the Supply Chain Manager, and therefore it is he/she that should be the point person communicating timely with all stakeholders.

     

    Harvey Justmann

  • Re: Forecasting
    sorin teleptean Newbie
    Currently Being Moderated

    It seems I am a bit late to the topic but it seems like  a good exercise anyways.

    From my perspective, normally supply chain owns the forecast management, but does not own the forecast, at least not entirely.

     

    Sales & Marketing (and Program Management ) should be the owner for the forecast, even if we speak about tier 1 or tier 2.

    In my utopic view on the subject, there should be an internal sales forecast, which should come from the Sales and Marketing ( they know the market conditions and trends, know or should know customer or market trends and specifics). This original forecast should be analyzed and discussed with the Supply Chain and the outcome and figures should be executed. In discussion: demand expectations, cost expectations, profit expectations, risk management. (Supply Chain should bring inputs on supply from experience, what is the best outcome in ITO in a cost effective manner, what might be the risk, etc. )

    A monthly review is always required to check the progress and changes on the medium and lon term:

                - sales forecast accuracy ( is original sales forecast in line with the actuals ? )

                 - demand drop vs. demand increase - costs vs delivery accuracy ( is it necessary to increase inventory to reach better OTD to sales forecast ? )

                 - history analysis (is there any trend or pattern you may apply to future forecast? )

                 - establish patterns for supplier action/reaction to demand increase/demand decrease and take decisions: safety stocks, extra forecasting, reduced lead time programs/ VMI.

     

    Reality is totally different from what I described above. Take for example the car industry.

          Sales and Marketing  of the car manufacturer says 80k pieces sales/year. This is not enough and supply chain can't make assumptions of their own on how to split these in monthly/weekly demand. If SP is wrong, they will have disruptions and extra costs all over the supply chain under. So most of the times they send the same thing to the tier 1, 80k per year  firm demand only for short term

         Sales and Marketing of the tier 1 says 80k pieces sales / year. Supply chain takes decisions on how to split in monthly/weekly demand.  If SP is wrong, they will have disruptions and extra costs all over the supply chain under. So most of the times they send the same thing to the tier 2, 80k per year and  firm demand only for short term

         Sales and Marketing of tier 2 says 80k pieces sales / year. In the end, only the Supply Chain of tier 2 takes the decision to split the yearly demand in weekly/monthly volumes to cover medium and long term. Tier 2 can't work with short term demand (4-6 weeks ) as the lead time of electronic and mechanical parts are 90% over 10 weeks.

         Main conclusion: If your forecast is not detailed and accurate, be sure the tier under you and the tier under them will make some forecast assumptions on their own which will for sure disrupt your supply chain or will increase the costs. I'd say it's wrong to rely only on the supply chain to manage and own the forecasting process.

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