Why Forecasting is a Valuable Tool in a Supply ChainDavid Inbar
Forecasts are future view
Forecasts are very important information in Supply chain. They tell everyone what to expect in the short and long future. But the key to the usefulness of information is only when it is shared. Shared with the right person at the right time.
How does supply chain uses Forecast
As the name says, Supply Chain is a chain. There are links in the front and links in the back. Customers are the links in the front. They create the demand for the end products that a company makes. Now, the end products in turn generate demand for the components and Sub Assembly. The entire supply chain is hungrily waiting for this demand information. This in turn will feed the supply chain that is down the line.
What to make and when to make
The main use of Forecast is that it tells the entire supply chain, what to make and when to make it and how much to make it. Imagine, how important is this as the delivery windows are reducing all over the industry. Product mix and short lead times are the mantra of the industry today.
Sharing the Forecast is Crucial
Information has no value if it is not shared to the right person at the right time. Forecast is information and it is needed to be communicated to the supply chain. But how to share the forecast information to the supply chain.
MRP need to be shared outside the company
MRP or Material Requirement Planning is a tool that converts demand to supply. It takes the demand from customers and tells the company what to make and how to make. It looks into the engineering details like Bill of Materials (BOM), sourcing information and tells how the demand is going to be fulfilled.
If it is necessary to purchase a component or part, MRP is going to suggest placing an order with the supplier who is supplying that item.
As the demand forecast is still fluid, the Supply chain manager may not want to release a firm purchase order as the demand may change at any time. But, he wants to give a heads up to the suppliers that he is likely to place an order soon. This is done by sharing the forecast in advance to the suppliers.
Ever Changing Forecast
As the demand is always changing, forecast also will change frequently. Most of the companies will run MRP every week to revise the forecast. This needs to be constantly communicated across the supply chain.
Spreadsheets are not the solution
Many companies use spreadsheets as the forecast sharing tool. They share the forecasts by spread sheets and keep sending updates and revisions for forecasts. But this will eventually end in a spreadsheet nightmare. Which version is right. What changed between version 1 and version 2 and so on.
Vendor Portal for Sharing the Forecast
In our earlier post why vendor portal is important, we explained the order collaboration benefits of vendor portal. Same benefits apply to Forecast collaboration also. As MRP results are not available outside an organization, companies should use a vendor portal to share the Forecast view as it comes out of MRP
Forecast collaboration process in a Vendor Portal
Below is the process of how the Forecast collaboration can be achieved using a vendor portal.
- MRP runs and creates suggested purchase orders for the supply chain.
- These recommendations are not ready to be converted to purchase orders but can be shared to the suppliers in advance.
- 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 vendor portal(www.tpsynergy.com) provides full forecast collaboration features. Many supply chain managers have effectively utilized the benefits of sharing the forecast across their supply chain