33:799:301 Lecture 4: Week 3 - 02_04_2019

35 views4 pages
Forecasting and Demand Planning
Forecasting and Demand Planning
The key building blocks from which all supply chain activities are
derived
First step is forecasting which uses data analysis and
judgement
Second step is demand planning where forecast is reviewed
to ensure it aligns with company strategy
Key Terms
Forecast is an estimate of future demand
Forecasting estimates future demand for products so they can be
purchased or made in appropriate quantities
Demand is the need for a particular product or component
Demand Planning is process of combining statistical forecasting
techniques and judgement to construct demand estimates
Independent Demand is demand for item that is unrelated to other
items, this is forecasted
Dependent Demand is directly related to other items, this is
calculated
Forecasting
Forecast will be inaccurate, but still very useful
Basis for most “downstream” supply chain planning decisions,
critical to be as accurate as possible
Good forecasting can benefit a company by facilitating more
effective planning which can lead to reduced inventories,
reduced costs, reduced stockouts, and improved customer
service
Bad forecasting can be root cause for opposite effects of
good forecasting; garbage in = garbage out; everything
based on bad forecast will be bad
The farther into the future you forecast, the greater the deviation
will be - Doppler Effect
Likely to be wrong, must try to be consistently accurate
Goal of forecasting and demand planning is to minimize forecast
error
The factors that influence demand must also be considered when
forecasting:
Market changes
Seasonality
Unlock document

This preview shows page 1 of the document.
Unlock all 4 pages and 3 million more documents.

Already have an account? Log in

Document Summary

The key building blocks from which all supply chain activities are derived. First step is forecasting which uses data analysis and judgement. Second step is demand planning where forecast is reviewed to ensure it aligns with company strategy. Forecast is an estimate of future demand. Forecasting estimates future demand for products so they can be purchased or made in appropriate quantities. Demand is the need for a particular product or component. Demand planning is process of combining statistical forecasting techniques and judgement to construct demand estimates. Independent demand is demand for item that is unrelated to other items, this is forecasted. Dependent demand is directly related to other items, this is calculated. Forecast will be inaccurate, but still very useful. Basis for most downstream supply chain planning decisions, critical to be as accurate as possible. Good forecasting can benefit a company by facilitating more effective planning which can lead to reduced inventories, reduced costs, reduced stockouts, and improved customer service.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents