Demand Forecasting in Supply Chain Management

7/31/2019 Demand Forecasting in Supply Chain Management

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Demand Forecasting in SupplyChain Management

Presented By:

Amith M.

Chetan C.S

Sanjay Bagriya

Yogeshkumar Joshi


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Supply Chain Management

Supply chain management (SCM) is the

management of a network of

interconnected businesses involved in the

provision of product and service packagesrequired by the end customers in a supply

chain. Supply chain management spans all

movement and storage of raw materials,work-in-process inventory, and finished goods

from point of origin to point of consumption.


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Supply-Demand Nexus

To have an effective supply chain managementframework; organizations must have a clearunderstanding of the supply - demand nexus andits implications for strategy and implementation.

There is an interdependent relationship betweensupply and demand; organizations need tounderstand customer demand so that they canmanage it, create future demand and, of course,

meet the level of desired customer satisfaction.Demand defines the supply chain target, whilesupply side capabilities support, shape andsustain demand.


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SCM Framework

Strategic: On the strategic level it is importantto know how SCM can contribute to theenterprises basic value proposition to the

customers. Structural: After the strategic issues are dealt

with, the next level question(s) that should beasked are: Should the organization marketdirectly or should it use distributors or otherintermediaries to reach the customers?


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Functional: This is the level where operational

details are decided upon. Functional

excellence requires that the optimal operating

practices for transportation management,warehouse operations, and materials

management (which includes forecasting,

inventory management, productionscheduling, and purchasing) are designed.


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Factors determining SCM Structure

Geographical

Cultural

Government Legislation Time


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Demand Forecasting

Demand forecasting is the activity of estimating

the quantity of a product or service that

consumers will purchase. Demand forecastingmay be used in making pricing decisions, in

assessing future capacity requirements, or in

making decisions on whether to enter a new

market.


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demand forecasting is done through

the following steps:

Determine the use of the forecast

Select the items to be forecast

Determine the time horizon of the forecast Select the forecasting model(s)

Gather the data

Make the forecast Validate and implement results


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Objectives of Demand Forecasting

Helping for continuous production

Regular supply of commodities

Formulation of price policy Arrangement of finance

Labour requirement


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Factors Involved In demand

Forecasting

Time period

Levels of forecasting-- International level--

Macro level-- Industry level-- Firm level

Purpose - General or Specific

Methods Of Forecasting

Nature Of Commodity Nature Of Competition


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Need for Demand Forecasting

Demand forecasting is essential for a firmbecause it must plan its output to meet theforecasted demand according to the

quantities demanded and the time at whichthese are demanded. The forecasting demandhelps a firm to arrange for the supplies of thenecessary inputs without any wastage of

materials and time and also helps a firm todiversify its output to stabilize its incomeovertime.


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Challenges Faced in Demand

Forecasting

Scale of forecast (how many goods to include

in the forecast?)

sporadic demand (erratic sales for many items

in the store)

introduction of new goods

changing prices and promotions


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Forecasting Methods

Qualitative Forecasting Method

Jury of executive opinion

Sales force composite

Delphi method

Consumer market survey

Quantitative Forecasting Methods

Nave Approach

Moving Averages (MA)

Exponential Smoothing

Time Series Decomposition


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Forecast Accuracy and Key

Performance Indicators (KPIs)

Forecast accuracy can be calculated using a formula

called MAPE Mean Absolute Percent Error. The

equation is as follows:

Error % = |Actual Forecast|/Actual Forecast accuracy is a metric that is inversely related

to MAPE (as MAPE increases, FA decreases). The

equation for forecast accuracy is:

FA = 100 MAPE

(expressed as a percentage)


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SCM Disaster at Nike

In 1999, profits dropped by 50 percent

Birth of NSC

i2 forecasting technology By 2004, Nike had an integrated and efficient

supply chain with i2 technologies forecasting

system, SAPs ERP system, and Siebels CRM

systems. Nike spent 6 years and $800 million

on the project.


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Thank You

Documents

Demand Forecasting in Supply Chain Management