Characteristics of Demand Forecasting in Supply Chain Management

10/25/19 10:30 AM

Demand forecasting is absolutely essential within supply chain management. Without adequate demand forecasting or planning, you will find that your inventory and stock falls short and could cost you a substantial amount of money over time. The entire concept behind demand forecasting is to ensure that you are fulfilling orders on time in the most efficient method/way possible. 

Characteristics of Demand Forecasting in Supply Chain Management

This is why you need to ensure that you understand the characteristics and methods associated with proper demand forecasting and locate a method that enables your company to meet demand in an efficient and on-time manner. Therefore, within this blog, we are going to discuss the characteristics of demand forecasting in supply chain management and how it may pertain to your manufacturing operation. 

Characteristics of Demand Forecasting in Supply Chain Management 

The characteristics of demand forecasting in supply chain management pertain to the following: 

  • Demand Forecasting is Always Wrong - It is important to understand that demand forecasts are always wrong. Even if the demand forecast are generated from demand forecasting software, you should expected to see some level of error within the forecasts. This is because year-to-year there will always be a variation in demand forecasts, no matter what company that you are. You have to take into account seasonality, macroeconomic factors, if you are running marketing campaigns, etc. All of these factors and more will greatly affect your demand and therefore leave you unable to accurately forecast what your demand will be. 
  • Long-Term Demand Forecast are Less Accurate - In correlation with demand forecasting being always wrong, long-term demand forecast are even less accurate than short-term forecast. This is because as you stretch your demand forecast further and further, the harder it is to accurately predict what it could be. Once again this is because of all of the factors associated with demand forecasting and any unforeseen events that may occur. Therefore, it is a must to attempt to only utilize short-term demand forecast and develop an idea of what demand may be.
  • Aggregate Demand Forecast are More Accurate - Aggregate demand forecast take the cake when it pertains to accuracy. This is because aggregate demand planning tends to have a smaller standard deviation of error relative to the mean. Many large manufacturing facilities utilize aggregate demand forecasting and have seen a tremendous amount of efficiency improvement within their manufacturing operation. This form of software may be a bit more expensive than the others but is well worth the cost. 

If you find that you are unable to purchase an expensive forecasting software, utilizing excel spreadsheets can be a great alternative option. If you find yourself utilizing an ERP or MRP software, you may be seeking to locate another software that can fill in the gaps where these softwares lack in terms of efficiency. This is where many companies have found themselves utilizing Advanced Planning and Scheduling (APS) Software. Advanced Planning and Scheduling (APS) Software has become a necessity for manufacturing operations that are seeking to improve operational efficiency and overall reduce costs and waste within the production process. Advanced Planning and Scheduling (APS) Software is a must for manufacturers that are wanting to maintain a competitive edge and improve their operation as a whole. 

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

  • Create optimized schedules balancing production efficiency and delivery performance
  • Maximize output on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to capacity
  • Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.

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