DEMAND FORECASTING IN A SUPPLY CHAIN

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DEMAND FORECASTING IN A SUPPLY CHAIN

• Moving from Supply Chain
• to
• Demand Management

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AGENDA

• INTRODUCTION (7.1)
• UNDERSTANDING (7.2 7.4)
• Characteristics
• Components
• Basic Approach

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AGENDA

• Methods (7.5)
• Static
• Adaptive
• Measures of Forecast Error (7.6)
• Summary and Conclusions

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INTRODUCTION

• Role in SCM
• Move
• From Managing Supply
• To Managing Demand
• Basis of All Planning

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INTRODUCTION

• Decision Areas (examples)
• Production
• Scheduling
• Inventory
• Aggregate Planning

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INTRODUCTION

• Decision Areas (examples)
• Marketing
• Sales Force Allocation
• Promotion
• NPD

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INTRODUCTION

• Decision Areas (examples)
• Finance
• Capital
• Cash Flow

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INTRODUCTION

• Decision Areas (examples)
• Personnel
• Workforce Planning
• Hiring
• Layoffs

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AGENDA

• UNDERSTANDING (7.2 7.4)
• Characteristics
• Components
• Basic Approach

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UNDERSTANDING

• Forecast Characteristics
• Always Wrong
• Expected Value Central Tendency
• Dispersion
• Forecast Error
• Long v Short
• Aggregate v Disaggregate

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UNDERSTANDING

• Components
• Past as Predictor of Future
• Maybe
• Useful
• Supply Chain Management
• Demand Management (?)

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UNDERSTANDING

• Components
• Past as Predictor of Future
• Factors (examples)
• Response Time
• Demand
• Marketing Actions
• State of Economy
• Etc.

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UNDERSTANDING

• Components
• Types
• Qualitative
• Subjective
• Judgment
• Lacking
• Past
• Expert Intelligence

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UNDERSTANDING

• Components
• Types
• Time Series
• Historical Demand
• No Change in Underlying Factors
• Appropriate
• Stable
• Basic Patter Does Not Fluctuate

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UNDERSTANDING

• Components
• Types
• Causal
• Past not Predictor of Future
• Cause more Relevant than Correlation
• Environmental Changes

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UNDERSTANDING

• Components
• Types
• Simulation
• Imitate Stimulus, Response, Outcome
• Consider
• Time Series
• Causal
• Qualitative
• Heuristics and Optimization

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UNDERSTANDING

• Components
• Past as Predictor of Future
• Factors (examples)
• Response Time
• Demand
• Marketing Actions
• State of Economy
• Etc.

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UNDERSTANDING

• Basic Approach
• Objective
• Support Decision
• Link to Action
• Shared (CPFR)
• Relevant Horizon

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UNDERSTANDING

• Basic Approach
• Integrate Planning
• Capacity
• Production
• Promotion
• Purchasing
• Other

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UNDERSTANDING

• Basic Approach
• Identify Key Factors
• Sales v Demand
• Nature of Relationship
• Primary
• Derived
• Covariates
• Demand
• Supply

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UNDERSTANDING

• Basic Approach
• Fundamentally
• Service Output Demands (SOD)
• Service Output Supply (SOS)

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UNDERSTANDING

• Basic Approach
• Appropriate Techniques
• Vary by
• Product
• Service
• Segment
• Horizon
• Will be Required

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UNDERSTANDING

• Basic Approach
• Monitor Performance
• Evaluate
• Accuracy
• Timeliness
• Value

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UNDERSTANDING

• Basic Approach
• Monitor Performance
• Compare
• Forecast v Actual
• When Available v When Needed
• Cost v Benefit

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AGENDA

• (Time Series) Methods (7.5)
• Static
• Adaptive

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METHODS

• Static
• Mixed

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METHODS

• Static
• Forecast

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METHODS

• Static
• Level and Trend
• Deseasonalize Demand
• Periodicity

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METHODS

• Static
• Level and Trend
• Periodicity
• P Even

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METHODS

• Static
• Level and Trend
• Periodicity
• P Odd

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METHODS

• Static
• Forecast Linear Relationship

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METHODS

• Adaptive
• Mixed

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METHODS

• Adaptive
• Basic Forecast

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METHODS

• Adaptive
• Basic Forecast Steps
• Initialize
• Forecast
• Measure Error
• Adapt

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METHODS

• Adaptive
• Basic Forecast Steps

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METHODS

• Adaptive
• Basic Forecast Steps

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METHODS

• Adaptive
• Moving Average

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METHODS

• Adaptive
• Simple Exponential Smoothing

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METHODS

• Adaptive
• Trend Corrected (Holt)

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METHODS

• Adaptive
• Trend Corrected (Holt)

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METHODS

• Adaptive
• Trend Season Corrected (Winter)

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METHODS

• Adaptive
• Trend Season Corrected (Winter)

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AGENDA

• Forecast Error (7.6)

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FORECAST ERROR

• Why
• Accuracy of Systematic Component
• Contingency Planning

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FORECAST ERROR

• Measures

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FORECAST ERROR

• Measures

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FORECAST ERROR

• Measures

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FORECAST ERROR

• Measures

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FORECAST ERROR

• Measures

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FORECAST ERROR

• Measures

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SUMMARY AND CONCLUSIONS