1. 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 20

2. 8-2 Forecasting Supply Chain Requirements CR (2004) Prentice Hall, Inc. I hope you'll keep in mind that economic forecasting is far from a perfect science. If recent history's any guide, the experts have some explaining to do about what they told us had to happen but never did. Ronald Reagan, 1984

3. 8-3 Forecasting in Inventory Strategy CR (2004) Prentice Hall, Inc. PLANNING ORGANIZING CONTROLLING Transport Strategy Transport fundamentals Transport decisions Customer service goals The product Logistics service Ord. proc. & info. sys. Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Location Strategy Location decisions The network planning process PLANNING ORGANIZING CONTROLLING Transport Strategy Transport fundamentals Transport decisions Customer service goals The product Logistics service Ord. proc. & info. sys. Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Location Strategy Location decisions The network planning process

4. 8-4 What’s Forecasted in the Supply Chain? Demand, sales or requirements Purchase prices Replenishment and delivery times CR (2004) Prentice Hall, Inc.

5. Supply Chain Management Accurate forecasting determines inventory levels in the supply chain Continuous replenishment – supplier & customer share continuously updated data – typically managed by the supplier – reduces inventory for the company – speeds customer delivery Variations of continuous replenishment – quick response – JIT (just-in-time) – VMI (vendor-managed inventory) – stockless inventory 12-5

6. The Effect of Inaccurate Forecasting Copyright 2011 John Wiley & Sons, Inc.12-6

7. Types of Forecasting Methods Depend on – time frame – demand behavior – causes of behavior Copyright 2011 John Wiley & Sons, Inc.12-7

8. Time Frame Indicates how far into the future is forecast – Short- to mid-range forecast typically encompasses the immediate future daily up to two years – Long-range forecast usually encompasses a period of time longer than two years Copyright 2011 John Wiley & Sons, Inc.12-8

9. 8-9 What’s Forecasted in the Supply Chain? Spatial Vs Temporal Demand Lumpy Vs Regular Demand Derived Vs. Independent Demand CR (2004) Prentice Hall, Inc.

10. 8-10 CR (2004) Prentice Hall, Inc. Some Forecasting Method Choices Qualitative Surveys Expert systems or rule-based Historical projection Exponential smoothing Causal or associative Regression analysis Collaborative