Demand Forecasting

Supply chain operations focus on demand planning, forecasting, and inventory management. Forecasts estimate customer demand for a particular product during a specific period of time based on historical data, external drivers such as upcoming sales and promotions, and any changes in trends or competition. Using

However, forecast errors will also lead to unhappy customers, lost sales, and excessive inventory. To minimize errors, retailers should find the right demand forecast. Retailers do not want to have a lot of inventory sitting in the back room and too little inventory that will cause out of stock. Holding huge inventory will cause a retailer to have more expenses and decrease their profit if item is not sold especially if the product is innovative type like electronics. The challenge is to balance the inventory with demand. Communication and contribution from people in functional area is also important to create better information and improve overall accuracy. At this time, customer satisfaction will start to decrease. For example, MPRNews says one of Target loyal customer, Ann Hendricks, she is disappointed with target store in St.Paul. “Too many times, she says that store is out of the milk, coffee, bread, pasta and other staples she wants. At Target, sometimes the whole section of cheeses is blank. There's nothing in there” (Moylan). A loyal customer like Ann Hendricks goes to the Lunds & Byerlys store in downtown St. Paul to buy her grocery

The retailers had to estimate their customers’ demands well in advance of the selling season and place bulk orders for each season’s inventory. This involved high risk for the retailers as over-estimation would lead to unsold stock; whereas under-estimation led to stock outs and loss of potential sales.

The current demand forecasting method is based on qualitative techniques more than quantitative ones. If the forecast is not accurate, the company would carry both inventory and stock out costs. It might lose customers due to shortage of supply or carry additional holding costs due to excess production. If the actual demand doesn’t match the forecast ones, and the forecast was too high, this will result in high inventories, obsolescence, asset disposals, and increased carrying costs. When a forecast is too low, the customer resorts to a competitive product or retailer. A supplier could lose both sales and shelf space at that retail location forever if their predictions continue to be inaccurate. The tolerance level of the average consumer

* Forecasting is an impartial strategic ingredient that will ensure apt base for reputable planning. Our forecast is always the first step in developing plans in running the business along with our future plans of growth strategies. With this tool, we are able to anticipate our sales within reason that then can allow for us to control our costs in conjunction with inventory which will then help us to enhance our customer service. Sales forecasting is a vital strategic tactic in our company’s methodology.

The customers, wholesalers and retailers may order in large quantities with the expectation that they will receive a greater allocation of products that are in short supply. The impact on the supply chain is significant as the forecasted demand is greatly, and unrealistically, increased with these inflated orders. Eventually orders disappear and cancellations pour in, making it impossible for the manufacturer to determine the real demand for its products

Forecasting is used in all businesses. Forecasting is used to help businesses decide how much they should produce and where to sell a product. Forecasting can aid a company in knowing the lifecycle of a product, which can help them to determine when and if they should discontinue a product. Forecasting can also help managers close the gap between supply and demand. If a forecast is properly predicted the supply of a product can satisfy the demand of the product. Forecasting is not always accurate however, and can lead to either over production of a product or underproduction of a product.

burden of amortization of investments and fixed costs; an insufficient capacity will mean the loss

The present organizational chart of the SC Department in the company includes two buyers, one material control clerk, one expeditor and two shipper/receivers. This structure was functional to the previous strategy because there was a strong focus on the purchasing function. We believe that in order to maximize the SC Department resources in accordance with the new structure the positions and functions of the people with the SC Department will have to be adapted to strengthen the inventory management function of the company. There company could benefit from having one person responsible for forecasting demand. Processes should be reviewed to ensure that the SC Department has sufficient access to information in order to achieve this task. Re-buying will also be of utmost importance now in order to ensure that there is always sufficient inventory to maintain production going.

CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.

Along with better communication, improved forecasting can help a supply chain run better. If you are able to forecast customer demand, you have a better chance on not being “tricked” by signals throughout the chain. A company can improve forecasting by looking at their past history, the history within their industry, or simply by asking their customers; predominantly through surveys or focus groups. Another way to improve you supply chain is to see if there is an opportunity to reduce the number of parties or complexity within the supply chain. The more stations there are the better chance for errors and delays. It is also easier to find and solve issues if your process is less complex. A smaller group also allows for better relationships between

Fixing the forecasts allows to build the communication between the different departments of a firm (communication between the operational staff, the financial staff, etc.). It should be also a guide for financial planning and monitoring the activity and the performance. It is a tool to evaluate profitability and productivity, to identify an eventual gap between actuals and OP (operating plan), and to fix it.

M&L Manufacturing Company is an example of a company that could benefit from forecasting. In the past the company has made an educated guess to determine necessary production for

But even this is not possible in case of a new product or innovation. A forecast of sales, demand, cash, requirements and several such business valuables are extremely essential for a business in order to be able to appropriately plan and conduct its operations in an effective and efficient manner. Yet, forecasts cannot be made accurately as there are several factors and changes in the current environment that leads to variations in forecasts and impacts or causes a manager to make changes in the forecasts.

The concept of demand forecasting more accurately measures and predicts the changes and opportunities in the supply chain.