Discuss key issues of forecasting in practice

Question

What will be an ideal response?

Answer 1

Answer: Collaborate in building forecasts. Collaboration with supply chain partners can often create a much more accurate forecast. However, most forecasts are still made not just within one company, but within one function in a company. It takes an investment of time and effort to build the relationships with your partners to begin sharing information and creating collaborative forecasts. The supply chain benefits of collaboration, however, are often an order of magnitude greater than the cost.

The value of data depends on where you are in the supply chain. Although collaboration is a hot topic, this does not mean that reams and reams of data need to be shared across the supply chain. The value of data depends on where one sits in the supply chain. To avoid being overwhelmed with data when collaborating and not being able to sort out what's valuable, think about what data is valuable to each member of the supply chain and share only that data.

Be sure to distinguish between demand and sales. Often, companies make the mistake of looking at historical sales and assuming that this is what the historical demand was. To get true demand, adjustments need to be made for unmet demand due to stockouts, competitor actions, pricing, promotions, and so forth. In many cases, these adjustments are qualitative in nature but are crucial to accurately reflect reality. Although it is not always easy, making an adjustment in a forecast to move toward demand from just sales will increase accuracy and therefore supply chain performance.