The Significance of Forecasting in a Supply ChainSrini Raja
What is Forecasting?
In a supply chain, forecasting is the prediction of what to expect in the short and long term for inventory, orders, production, etc. The most common forecast is MRP or Material Requirement Planning. This takes into account customer demand, and looks into supply details like Bill of Lading, and sourcing info to give valuable information on inventory and how best to fulfill orders. Due to the variable nature of a supply chain, forecasts are not always exact, but rather an approximation given historical data and predicted events. As such, during a large event or sale like Black Friday, forecasts may become less accurate as demand is hard to predict.
Why Forecasts are Important
While forecasts can be useful internally, to get a general idea of what to expect, the main use is for other links in the supply chain. Forecasts are crucial for your suppliers because it tells them how much to make and when to make it. Without it, your suppliers are left guessing which could lead to drastic over or under stocking. Forecasts are also important for your customers, especially those with large or variable order quantities. For them, its important to know how and when their order will be shipped. Without a shipping and inventory forecast, your customers may lose trust in your ability to get their order on time.
All the benefits mentioned above can only be achieved if your forecasts are successfully and promptly shared within your supply chain. The best way to achieve this is by using a common vendor portal. Since MRP forecasts are not usually available outside of an organization, having a common system to allow sharing and collaboration with forecasts is crucial. Since MRPs are usually updated frequently, it’s much more efficient to have a vendor portal than to manually share them. The process for collaboration is as follows:
- MRP runs and creates suggested purchase orders for the supply chain
- Raw planning output is sent to the vendor portal from ERP MRP output.
- Planners review the forecast once in the vendor portal and then publish the forecast
- Suppliers will be able to view the forecast on the portal and download them to their ERP system
- Suppliers will provide commits (confirmation) to the forecast.
- The supplier commits in turn will get the feedback to the MRP system thus completing the loop
As the full process is automated, effective communication of the forecast to the suppliers is achieved easily.
TPSynergy’s vendor portal provides full forecast collaboration features. Many supply chain managers have effectively utilized the benefits of sharing the forecast across their supply chain. Contact us today to learn how TPSynergy can help you.