Pertemuan 11

Demand Forecasting in a Supply Chain

Topics The role of forecasting in a supply chain Characteristics of forecasts Components of a forecasts and forecasting methods Basic approach to demand forecasting Time-series forecasting methods Measures of forecast error The role of IT in forecasting

The role of forecasting in a supply chain Demand forecasts form the basis of all supply chain planning. All push processes are performed in response to customer demand. All pull processes also need forecast because not the exact amount will executed.

Characteristics of forecasts Forecast are always inaccurate Long-term forecasts are usually less accurate than short-term Aggregate forecasts are usually more accurate than disaggregate forecasts The farther up the supply chain a company is, the greater is the distortion of information it receives.

Components of a forecasts and forecasting methods Forecasting methods are classified according to four types: Qualitative Time Series Causal Simulation

Basic approach to demand forecasting Five points to forecast effectively: Understand the objective of forecasting Integrate demand planning and forecasting throughout the supply chain Identify the major factors that influence the demand forecast Forecast at the appropriate level of aggregation Establish performance and error measures for the forecast

Time-series forecasting methods Multiplicative Systematic component = level x trend x seasonal factor Additive Systematic component = level + trend + seasonal factor Mixed Systematic component = (level + trend) x seasonal factor

Measures of forecast error Finding an error that is well beyond historical estimates nay indicate that the forecasting method in use is no longer appropriate or demand has fundamentally changed.

Measures of forecast error [cont] Forecast errors contain valuable information and must be analyzed carefully for two reason: Managers use error analysis to determine whether the current forecasting method is predicting the systematic component of demand accurately All contingency plans must account for forecast error

The role of IT in forecasting Forecasts are virtually always inaccurate. A good IT system should help track historical forecast errors so they can be incorporated into future decision. Forecasting module for supply chain are available in ERP from SAP and Oracle. And statistical analysis software such SAS and SPSS can be used for forecasting.

Sales and Operations Planning: Planning Supply and Demand in a Supply Chain

Topics Responding to predictable variability in the Supply Chain Managing Supply Managing Demand

Responding to predictable variability in the Supply Chain Faced with predictable variability, a company’s goal is to respond in a manner that balances supply with demand to maximize profitability. The goal of sales and operations planning is to appropriately combine two broad option to handle predictable variability: Manage supply using capacity, inventory, subcontracting, and backlogs Manage demand using short-term price discounts and promotions

Managing Supply A firm can vary supply of product by controlling a combination of the following two factors: Production Capacity Inventory

Managing Supply [cont.] Managing Capacity Time flexibility from workforce Use of seasonal workforce Use of subcontracting Use of dual facilities-specialized and flexible Designing product flexibility into the production processes

Managing Supply [cont.] Managing Inventory Using common components across multiple products Build inventory of high-demand or predictable-demand products

Managing Demand Supply chains can influence demand by using pricing and other forms of promotion. Four key factors influence the timing of a promotion: Impact of the promotion on demand Cost of holding inventory Cost of changing the level of capacity Product margins