Assess the critical role played by forecasting in the overall planning activities of a business organization

Transcription

1 Week 2: Forecasting and Demand Management Anticipating demand is the basis for almost all planning processes in an organization. Being able to forecast demand with a reasonable degree of accuracy is therefore critical to an organization's success. If demand forecasting is accurate, the efficiency of the supply chain can be optimized by reducing inventory and maintaining appropriate levels of capacity. Forecasting is a dynamic process that must be agile enough to allow all segments of the supply chain time to respond and make modifications. This week you will be researching the main categories of forecasting techniques including qualitative, time series analysis, and simulation, and the reasons for using these techniques in a variety of business contexts. As forecasting is far from an exact science and forecasts are frequently wrong, you will also look at how estimates of error can be calculated statistically and applied to make rationally based adjustments. Your purpose this week will be to analyze the elements of good forecasting in order to synthesize an effective model of demand management. Week 2 > Learning Outcomes By the end of this week, you will be able to: Assess the critical role played by forecasting in the overall planning activities of a business organization Compare and contrast demand management in a manufacturing versus a services organization Synthesize an effective model of the role of demand management in a global business

2 During Week 2, you will use a variety of resources including selections from the course text, journal articles, and audio versions of key readings. Audio versions of the key readings include those articles used for completing both Discussion Questions and Applications. This week, you refer to Chapter 5 of your course text, Handbook of Global Supply Chain Management, identified in your Syllabus and in Resources under Week 2, which focuses on Demand Management. The chapter examines the effect of different types of demand on the organization s global supply chain. It goes on to consider the use of sales management forecasting within demand management to better anticipate production needs for more effective management of the supply chain. This week s text readings explore how forecasting and demand management play an important role in the planning processes of global business organizations. This week s journal article, Demand Management Revisited, presents demand management as a strategic weapon in the battle to gain competitive advantage. This resource, which will be reviewed more in depth in a resource audio summary, may give you ideas on how approach your research for this week s Discussion Question. Let s outline some of the individual resources that you will use in this week s activities.

3 Chapter 5, Demand Management, of Handbook of Global Supply Chain Management. Chapter 5 of the Handbook of Global Supply Chain Management discusses the elements of demand that are present within a supply chain: demand management, demand planning, and sales forecasting management. The chapter presents the three types of demand, independent, dependent, and derived, and examines which type may affect a company. Sales forecasting is an integral part of matching global demand and supply, thus the chapter outlines various forecasting techniques and provides an example of a sales forecasting process. The ability of an organization to accurately forecast future demand provides that company with greater flexibility and responsiveness within their supply chain. The chapter also emphasizes the need for organizations to develop the sales forecast prior to developing the business plan; expected demand should drive the activities of the business, not vice versa. While reading this chapter, it is important to note the differences between the three types of demand, how organizations are affected by each type, and the impact of demand on global logistics, supply chain costs, and customer service levels.

4 Article Understanding Demand from Supply Chain Management Review. This article emphasizes the need for managers to understand all aspects of demand. The article also outlines the requirements surrounding demand that managers must be familiar with in order to gain new value from supply chains. In the article, Understanding Demand, John Mentzer and Mark Moon analyze the impact managers can have on costs within the supply chain as well as customer service levels. This requires managers to be well-versed with the three types of demand: dependent, derived, and independent. The authors identify the types of demand that affect particular companies and offer suggestions on how organisations can develop techniques, systems, and processes to manage each type of demand. The conclusions of the article reveal the importance of communication within the supply chain, coordination of sales and operations planning, and the establishment of a culture of collaboration for effective supply chain performance. The authors also recognize sales forecasting as a vital component in the process of matching demand and supply.

5 Article Demand Management Revisited from Journal of Business Forecasting. In this article, Larry Lapide examines his previously published work in an effort to assess the full picture of processes and practices related to demand management. He also examines the definition of demand management as it pertains to making decisions about future supply and demand planning cycles. In the article, Demand Management Revisited, Lapide expands on his previous demand management (DM) research. The author discovers that the generally accepted definition of DM is too general and that DM processes can be divided into long-, medium-, and short-term planning processes. The article also illustrates the growing importance of demand management as a part of supply chain management. The author s research shows that supply-demand matching processes and demand forecasting play an important role in gauging and meeting customer demand in the short-term, while also focusing on long-term aspects.