What does good forecasting address?
Reduced Stock-outs and elimination of excess or wasteful inventory
A competitive environment leads to an industry focus on...
increasing customer satisfaction, reducing cost of providing products and services.
Businesses operate in a competitive environment which forces them to ?
Operate with maximum efficiency. Costs must be controlled while continuing to meet customer service expectations in a profitable manner.
How does Marketing forecast?
Develop sales forecasts for planning throughout org; establish promotional budgets
How does Accounting forecast?
Forecasts of costs and revenues for tax planning
How does HR forecast?
Relies on forecasts to plan recruitment of new employees; changes in the workforce
How does Finance forecast?
Forecasts cash flow to maintain solvency
How does Production forecast?
Forecasts determine raw-material needs and finished inventory targets
How do businesses use forecasts?
Krispy Kreme- Production requirements
Fiat Auto- Total sales and parts requirements
Columbia Gas- Gas Supply and transportation storage capacity
BNSF- demand for rail cars
How do non-profits and government agencies use forecasts?
Police departments- demand for police patrol services
Texas Legislative Budget Board- Growth rate for personal income
Hospitals- Nursing staff requirements, billable procedures
What is SCM?
The management of relationships across the supply chain
To be a good supply chain partner, a firm must...
Have an accurate estimate of needs of its customers and provide a accurate estimate of its needs to suppliers
Qualitative Methods of forecasting...
Involves greater subjectivity and can be used when there is a lack of historical data
What are the Qualitative methods?
Judgmental Methods and Market Research Methods
Based on informed opinions: Jury of Executive Opinion, Sales Force Estimation, and Delphi (developed by Rand Corp)
Market Research Methods?
Based on systematic data collection and statistical analysis. Focus groups and consumer surveys?)
What are Quantitative Methods?
Based on mathematical techniques. More objective approach, requires historical data.
What are the two Quantitative Methods?
Time Series Methods or Causal Modeling Method
What are time series methods?
Forecasts are based solely on past (historical) demand. Assumption is that future demand is reflected in past demand patterns.
What is the causal modeling method?
Demand is influenced by one or more independent variables.
What are the advantages of Causal versus Time Series Methods?
Causal is typically better for long-range forecasting. Causal is typically better for predicting shifts (or turning points) in data patterns. Causal modeling can generate a better understanding of the mechanisms influencing. Sales/Demand.
What are the disadvantages of Causal versus time series?
Causal requires more data and requires special expertise that many managers do not have.
If you can get the forecast right, you have the potential to get everything else in the supply chain right.