Demand forecasting Forecast is said by Stevenson to be a basic input in the decision processes of operations management because they provide

information on future demand. The important of forecasting to operations management cannot be overstate. The primary goal of operations management is to match supply with demand. Having a forecast is important for determining how much capacity or supply will be needed to meet demand. There are two important aspects of forecasts. The first one is the expected level of demand which can a function of some structural variation such as a trend or seasonal variation. The second aspect is the measurement part which deals with the function of the ability of forecasters to correctly model demand, random variation and sometimes unforeseen events (Stevenson, 2009). Forecasts are made with a reference to a specific time horizon. The time scale may range from hourly to the next five years depending on the industry. Within the time frame, forecasts are basis for budgeting, planning capacity, sales, production and inventory, purchasing and more. ³Demand forecasting is essentially a linear process of translating input assumptions into a forecast of expected sales; demand management, by contrast, is a highly iterative process that involves driving to a revenue and profit target through prioritization of customers, channels, products, geographies and the demand stimulation programs available to the enterprise.´ (Aberdeen Group ND). When considering the traditional distribution system relationships between the manufacturers of a consumer packaged goods and the retailers who sell the product to the public. Each retailer must forecast demand for each SKU at the store level. Based on these forecasts and on a consideration of available inventory, warehouse stocks, lead times, promotion plans, and other factors, each retailer than develops an "order plan" which contains the timing and size of the stock replenishment orders that the retailer intends to place on the manufacturer. While this is going on, the manufacturer is also forecasting its demand for each item by time period. In effect, the manufacturer is trying to forecast, time period by time period, the effective sum of the order plans from all of the retailers. In traditional practice, the manufacturer forecasts this total demand independently, with no input from the retailers. In collaborative forecasting, the retailers would share their demand forecasts and their current order plans with the manufacturer, and the manufacturer would aggregate these data to construct and verify its forecasts. Discrepancies

between the retail order plans and the manufacturer forecasts would be identified and resolved. The final result would be improved forecast accuracy, less total inventory in the system, and a smoother deployment of the goods into the retail channel. The central premise of collaborative forecasting has great merit, but there are a number of potential problems that must be solved to gain the promised benefits. First, there is an issue with the level of aggregation of the forecasts being shared. Second, there is a communications issue involving the transfer of these data between firms. Finally, there is an issue with the sheer volume of data that would be processed in such a system (Armstrong, Green, 2005).

There are several factors affecting demand forecasting in the 21st century, so to explore more the researcher looked at the IBM Company and how forecast affects their operations at different level of the processes. This is shown in the figure below.

Dotted lines represent possible relationships. The Methodology Tree for Forecasting below classifies all possible types of forecasting methods into different categories and shows how they relate to one another.Below is the brief description of forecasting methods. starting with the primary distinction between methods that rely on judgment and those that require quantitative data. Forecasting methods and the relationships between them are shown in the figure below. Methodology Tree for Forecasting .

forecasting is a wide range area that demands a huge number of skilled workers. Instead. As a result. In general practice. money. while inaccurate forecasts will inevitably lead to inefficient. moving from the suppliers' raw materials to finished goods in the customers' hands. and through to the eventual shipment of the order to the customer (Armstrong. once a customer order materializes. it can be fulfilled immediately ± since most customers are not willing to wait the time it would take to actually process their order throughout the supply chain and make the product based on their order. rationalizing its transportation.As can be seen from the above information that has been collected. they must anticipate and plan for future demand so that they can react immediately to customer orders as they occur. takes time. science and technology. Green. now largely global marketplace requires companies to proactively forecast and manage supply and demand dynamically ± supported by best-of-breed techniques. Most firms cannot simply wait for demand to emerge and then react to it. Due to this. Demand forecasts are necessary since the basic operations process. Forecasts of future demand will determine the quantities that should be purchased. manufacturer. costs down and customers happy in a Web-based. An order cycle could take weeks or months to go back through part suppliers and sub-assemblers. this calls for a delicate balance of art. through manufacture of the product. or retailer. The ability to accurately forecast demand also affords the firm opportunities to control costs through leveling its production quantities. virtually every organization involved needs to manufacture or at least order parts based on a forecast of future demand. produced. accurate demand forecasts lead to efficient operations and high levels of customer service. In other words. 2005). Thus. keeping inventory levels low. Forecasting product demand is crucial to any supplier. high cost . and shipped. and can also rake a lot of time. most manufacturers "make to stock" rather than "make to order" ± they plan ahead and then deploy inventories of finished goods into field locations. Today. Firms that offer rapid delivery to their customers will tend to force all competitors in the market to keep finished goods inventories in order to provide fast order cycle times. technologies and practices. and generally planning for efficient logistics operations.

. Demand Planning Demand. is products and services when and where customer needs (Susan L. In many supply chains. 2009). The factors affecting demand uncertainty and unpredictable demand information are accelerating economic cycle intense competition. There is another definition for demand planning. ³Demand planning is the business¶s starting point for the planning and use of company resources in the pursuit of profitability´ (Susan L. To control the demand variability. Demand planning is important to basic planning activities in demand and supply network and to establish the effectiveness of manufacturing and logistics planning. the most important action we can take to improve the efficiency and effectiveness of the logistics process is to improve the quality of the demand forecasts. Chang and Chou. 2009). Argon Chen. Huang. may become lifeline in recession´ (Susan L. 2006 said ³demand aggregation is far more effective than statistical forecasting in operations planning for any two demands with low positive correlation or negative correlation.operations and/or poor levels of customer service. Somehow to develop the quality of supply chain planning. likes capacity and safety stock planning. Demand planning defines as ³improving cash flow and profitability.´ Besides. demand planning is fetching the best challenges faced by manufacturers. 2006 said ³real option approach (based-forecasting) can effectively deal with the long-term trends and random variation involved in a given demand stochastic diffusion process´ for forecasting demand during the approaching planning horizon for products with high random volatility on demand. fickle end user preferences and fast development of product in supply chain. 2009).

At last. make the case for improving demand planning processes with delay.´ (Yankee Group.According to Susan L. Besides. demand planning has accept to link and integrate processes transversely networks and facilitate nearer teamwork among before isolated parties. improving the layout path with include implications for other business process. Third. there are four parts is discussing on demand planning best practices in relation to ongoing. 2009 stated that in term of strategic management. therefore will discuss the people implications and change management requirement. rather than simply reacting to it. even successful. In recent times. many enterprises are uncertain about quantifying total cost of ownership and identifying business objectives. 2004). in order to be thriving. Benefits relates to business performance associated with sales and operation planning if it is being managed in an appropriate way. . Developing an effective supply-chain integration strategy for the long term requires that companies address these two areas before they can realistically justify or refute technology options. First of all. more satisfying skill across the value chain. Second. to implement and operate the processes at peak performance. there are many firms are focusing on managing demand. 2004 stated that Demand planning has enabled companies to more perfectly forecast what their industry. in the recessionary period and preparing to come out the other part in best possible financial health. market and customers will involve. ³Beyond simply meeting influential partner¶s demands. respond enthusiastically to market and consumer trends and deliver a better. explaining the best practices in demand planning that are of particular importance in recession. Advanced planning and scheduling includes demand. According to Yankee Group. supply or specific S&OP modules with the functionality needed in supporting the S&OP process.

L and Jonsson. Hence. there also benefits of using the well working planning process or without advanced working planning systems support and increases the understanding of APS support the planning process and which benefits APS give to the process. Besides that. finite scheduling and real time integrated S&OP work bench being included in the APS systems. Studies have shown that APS are used as descriptive nature and the benefits obtained will be used of indirect interest. Basically. planning efficiency and learning effect. The case study analysis showed the benefits perceived in the different S&OP activities differed. 2010) . The most common benefit will be the decision support benefits ³visualization of information´ has been underestimated by previous research and APS experts.P. the cause and effect relationship between the potential benefits and its antecedents. inventory levels and utilization rates for higher level of customer service and major reduction in costs. there are also greater potential of frequent rescheduling support modifications of S&OP decisions. these potential benefits being explained in case unique usage.K. As it is well known there are a lot of benefits but is divided into three which are decision support system. This system has been used in the design of advanced algorithms in solving planning and scheduling problems. Even some studies shows that APS support planning in general and but don¶t look at specific planning purpose. At the same time the functions such as of what if simulation. Even this system being practiced in delivery times. (Ivert.This system helps in frequent rescheduling support modifications of S&OP decisions.

and kits where demand for one item produces demand for others in various multiples. demand The least solution is the sales and operations planning where successful companies . in. inventory management and sales & operation planning. MRP. performance and exception management to provide a comprehensive demand management solution. It supports multi level DRP.transits and reorder policies to produce time-phased inventory plans. It provides demand and supply planning solutions in delivering wider scale improvements in forecast accuracy.Demand works Demand works was founded in 1993 as Advanced Planning System. At the same it gives importance to supply planning which balances demand scenario with inventories. Next the inventory management which gives full view to inventories demand and supply throughout the organization s supply chain. orders. The breakdowns would be desktop collaboration using Excel and Email. Demand works diverted the focuses on business forecasting. lead times and capacities to generate actionable sales and operation plans. automated collaboration with Excel and Email or Network File Sharing and the automated collaboration with Smoothie Collaborators. Business forecasting in engine were designed for the noisy tactical data that prevails and channel based sales and operation planning. forecast collaboration. inventories. forecast error and desired levels to calculate optimal inventories. Another solution would be the safety stock optimization which considers the lead times. and safety stock optimization. Under the aspect of forecasting collaboration it has three primary approaches for collaborative forecasting with Smoothie and two primary user interfaces which includes Microsoft Excel and Smoothie Collaborators (Source: It moves well with the difficult to forecast time series (Source: www. It influences the forecasts.demandworks. coordination and asset deployment. Demand planning which is set up for an extreme accurate expected statistical forecast and adds value to important aspect such as demand consensus.

Automatic forecasts will be the best and firm has the option to guide the engine by giving opinion in using trended or seasonal lead times and required service levels. Smmothie s precision aligned with other commercial statistical engines where it scores tremendous accuracy in such comparisons which had made many customers to benchmark the time-series which exist in industry this software works well. In the situation of difficult. making top-down changes. Smoothie help businesses optimize inventory levels and prepare for the unexpected by using the error estimates. producing. (Source: . executive and financial functions within a business (Source: www. or even forecasting with simulated histories without losing visibility to actual demand. this software is developed for noisy tactical data which exist in product and channel-based sales and operations planning. Business Forecasting Software Statistics are forwarded. logistics.use to anticipate and synchronize supply and demand.demandworks.demandworks. Besides forecasting. Existence of powerful multi level synchronization has improved accuracy and exclusion filtering which highlights items otherwise further attention that customer required. Besides that. The solutions record: 1. purchasing. and to achieve focus and strategic alignment among the selling. but don t have to be a statistician to use Smoothie.

. Smoothie can function with other system such as financial planning and budgeting.demandworks. Note that the comparisons incorporate historic performance as well as future expectations (Source: www. Smoothie too can get along with reference plan which can be automatically aggregated or disaggregated with Smoothie s statistical or collaborative plans. consensus. CRM. trade funds. Sales plan and budget presented together for easy comparison. Demand Planning This image shows spread sheet and graphical view of Smoothie with statistical consensus sales plan and budgeted presented simultaneously for easy comparison. The image below shows a spreadsheet and graphical view of Smoothie with Excel and other forecasting system.

Forecasting Collaboration -Desktop Collaboration Using Excel and Email Automated Collaboration with Excel and Email or Network File Sharing Automated Collaboration with Smoothie Collaborators .2.

S&OP .Safety Stock Optimization Inventory Management 3.

It is similar to the desktop approach excluding the security-controlled spreadsheets are automatically distributed and accounted back into the plan in an automated. The contributor contributes as usual by receiving spreadsheets by changing the figures and sending them back to the demand manager. Automated Collaboration with Excel and Email or Network File Sharing With Smoothie Mambo. Authorization is required for Smoothie Mambo server software and traitor licenses for the joint users. Collaborators can even export graphs or spreadsheets. the capability to communicate and 'what-if' directly with the statistical forecasting functions. or using a Microsoft SharePoint® shared workspace. They also provide advanced graphic and spreadsheet-based views. pre-formatted forecast alliance spreadsheets can be planned for automatic distribution to users via email. plus easy viewing and exchange of notes with other users. (But with Smoothie the process will be much easier and more precise). Desktop approach need some IT support for configuring the server and automation. Smoothie Collaborator clients permit dealings with plans at flexible levels of aggregation. Collaborator training is not required since the mutual user interface is excel. prices or costs. scheduled set of processes.As it is known excel and email hits the higher usage in corporations which don¶t require special IT or infrastructure support. and automatic combination of collaborative input into the agreed plan. shared directories. using substitute units of measure. possible visibility to reference forecasts and other related demand information. . however it offers the benefits of easy operation and management. a basic interface for mutual users. Automated Collaboration with Smoothie Collaborators The elective Smoothie Collaborator client gives end users with a wider functionality for glancing and adjusting forecasts. etc.

forecast error and desired service levels to calculate optimal inventories. New plans can be integrated with your ERP system to produce demand. and kits where demand has positive relationship. Smoothie Collaborator can be used even there is no internet connection while traveling or meeting with customers. orders. It influences forecasts. Calculated safety stocks can be two forms which are time-based or quantity-based. . While inspiring group or item-specific changes. Inventory management in Smoothie SP being handy for multi-level DRP. Fixed policies like minimum order quantities or lead times can be imported from the ERP system. and statistical together with fixed policies . enabling rapid and informed inventory optimizations. There are changes in policies and simulated for groups or classifications of items. Safety Stock Optimization Smoothie® SP gives importance to lead times. the user can immediately evaluate the force on projected inventories in units or inventory cost. This means demand of one product has affects the demand for others in different multiples. MRP. or Smoothie will export the requirements into handy spreadsheet or database formats. or they can be administered within Smoothie. inventories. in-transits and reorder policies to produce timephased inventory plans. demand and supply throughout your supply chain. Each item or item-location in Smoothie can have different replenishment and safety stock policies.The Smoothie Mambo server software restricts the details that users can view and/or modify. In accordance with spreadsheets. Minimum inventory levels is being administered with the occurrence of fixed policies like minimum quantities or days of cover.For example. the safety stock policy can be the greatest of 100 units or a 98 percent service level. and forecast alterations and notes are seamless ly synchronized with the host plan when users connect to the server. Stimulate Inventory Management Smoothie® provides entire visibility to inventories.

demandworks. The Pivot Forecasting® in Smoothie enables matching by making it feasible for different functions in the business to imagine and implement according to their distinctive perspectives. production and procurement planning.demandworks. production facilities. and Smoothie® As sales and operation planning is just business process.Sales and Operations Planning Strategic business process that successful companies use to foresee and match supply and demand. . highly visible framework.demandworks. executive and economic functions within a business can be referred as sales and operations Sales and Finance might work with revenue. Different parts of the company have the ability to deal with different units. logistics. and to accomplish focus and tactical position among the business transactions. An effective S&OP process helps in the analysis and direction of business People. it is permitted by tools like Smoothie. The plant may produce in batches of gallons. Sales and operations planning are all about bringing together: this means matching demand with supply. and aligning functions within your business. Process. Vitality of S& OP process is Smoothie merge demand and supply with single outcome. distribution and suppliers. tactics with strategy. tons or hectolitres. while production and logistics work with units. In the supply point of view it helps in the founding of valuable supply policies and synchronizes tactical supply executing with demand and inventory management strategy (Source: www. such as products. and it guarantees that the key functions within the business run synchronously (Source: www. Some parts of the company are more focused on channels. truck or rail car load (Source: www. pallets. Furthermore. it produces accurate numerical forecasts and provides an effective construction for forecast collaboration. while logistics plans and distributes cases. Smoothie lends accuracy and visibility to supply as well as sales plans. On the demand side.

000 each or 10 for $9. or contact Demand Works for specific configuration advice. Standalone Pricing Base Price* $500 Price With Required 1-Yr Maintenance* N/A** $3.000 $4. (Requires Smoothie Mambo) Spreadsheet Collaborator Automated distribution of collaboration spreadsheets and consolidation of spreadsheet forecasts and comments with $5. Collaborators can not create new models or perform any other model administration.000 Smoothie Plus $5.500 Smoothie $4.500 $1. slot in supply as well as demand. Smoothie Pricing Smoothie® by Demand Works is available in different versions to satisfy a range of organizational and business needs. and it operates on various and constant levels of product and channel aggregation. but it's very much harder to do and the business enjoys the benefits which is achieved significantly thus. Collaborators can review and adjust demand plans.800 $6. increase with the effective use of technology.Smoothie has powerful functionality for supportive perception.000 or . It allows automatic and synchronous alteration of substitute measures.700 each or 10 for $12.750 or 20 for $22. Smoothie Plus.000 $1. See the Products and Solutions sections for more information about the various editions of Smoothie.000 Smoothie Learning Edition $2.000 Smoothie SP Server-Based Configurations Base Price* Smoothie Mambo (per server)*** (Requires either Smoothie. S&OP can be implemented without tools like Smoothie. or Smoothie SP) Smoothie Collaborator Support untethered demand collaboration.

000 Kinaxis RapidResponse Kinaxis RapidResponse combines collaborative and integrated demand-supply planning.000 $800 or 10 for $6.cfm assessed on 22 November 2010). Besides. therefore RapidResponse is an ondemand supply chain management service that provide speedy and collaborative supply chain planning. high technological. The supply chain company wants to increase customer service meanwhile reducing inventory risk. consumer products. that can respond to plan variations rapidly and successfully to accomplish greatest financial performance and higher customer fulfillment. (Requires Smoothie Mambo) Read-Only Can access demand as well as supply plans. it is providing on-demand supply chain management solutions to help a big range of industries and customers where are aerospace & defense. consumer electronics and medicals devices markets. sales and operations planning (S&OP) and supply chain risk management(http://www.kinaxis. supply management.Smoothie Mambo. monitoring and response to change to empower front-line supply chain staff with tools for demand management. automotive. supply chain visibility. With this but can not make changes. (Requires Smoothie Mambo) 20 for $16. continuous monitoring of performance to the plan and instant response to demand and supply misalignments. Kinaxis RapidResponse is helping to close that gap and balance demand and supply that can deliver to customers need. .

Besides. The reason why customers chose RapidResponse to over solution by ERP vendors is tuned supply chain analytics.(Source: http://www. Raytheon and Jabil. . it is enables to instantly understand the impact on operations of a change in demand supply or product and the co-operation across the organization can collaborate on multiple action alternatives to make quick and informed decision. There are two products provide by Kinaxis RapidResponse ± RapidResponse Sales and Operation Planning (S&OP) edition and RapidResponse Supply Chain Management (SCM) edition.husdal. Research in Motion (RIM).com/about/kinaxis-rapid-response/ assessed on 28 November 2010) There are few successful world¶s leading manufacturing companies are using Kinaxis RapidResponse to establish superior responsiveness within their fulfillment networks and supply chains and gain competitive advantage as well as to improve supply chain efficiency and customer service levels such as Casio. RapidResponse Supply Chain Management (SCM) Edition The world¶s market leading manufacturing companies use RapidRespones SCM edition to improve supply chain efficiency and customer service levels. RapidResponse SCM edition make it possible for create a supply chain plan and actively monitor performance to that plan and coordinate a response when the plan is at risk immediately. extensive collaboration tools and multi enterprise supply chain visibility and invincibility computational speed. Toshiba.

before they turn into major problems y y y Rapid Calculations ± see outcomes in seconds What-if analysis ± collaborate to determine the best supply chain decision possible Score carding ± Rank and align decisions with goals in real time.Dealing the biggest supply chain management and S&OP challenges with a single service that provides: y y Visibility into critical date ± Get a single view of the truth Alerts and Event management ± Focus on urgent issues. .

pdf ) Operational Scorecard (Source: http://www.

Below are the controlling sales and operation planning in . it is balancing demand and supply. Simultaneously. Besides. The S&OP edition workbooks are allowing modifying and reviewing the data in S&OP process. supply planning. There are not limited to a sequential process with RapidResponse. financial review. Despite the RapidResponese offer a roadmap to organization that can follow the process and usage of the solution is flexible and adaptable. demand planning. RapidResponse S&OP edition are providing resources and functionality. y Dashboards and workbooks ± are the worksheets that provide a role based view of key metrics for evaluating the Sales and Operating Planning at vary stages of the process and it is evaluating the data in the S&OP dashboards against financial and operation goals.RapidResponse Sales and Operation Planning (S&OP) edition Sales and operations planning is an integrated business management process through the leadership team to achieve focus. also enables continuous. weigh financial and operational objectives and perform both volume and mix planning from a system. RapidResponse: To support the stages found in S&OP: S&OP cycle kick off. thus can take action to course correct immediately. RapidResponse Sales and Operation Planning (S&OP) edition is strong enterprise application that drives mature S&OP processes. this system also assist maximize business opportunities and minimize supply chain risk by ensuring the plan are feasible and always in update. event driven S&OP ± the state of current plan is actively implement and appropriate people are notified when the plan is at risk. executive meeting and publishing the S&OP plan. alignment and synchronization among all function of the company and also supports effective supply chain management. Therefore.


Scenarios are evaluated against key metrics. and each party can review their results and commit their best scenario. Scenarios are enable organization to create few versions of S&OP plan quickly.y Scenarios ± deep scenario simulation capabilities are include for managing the S&OP process. .

y Multiple Hierarchies ± can view data at a high or lower. as well as can view the intersection of two or more hierarchies. aggregate level in the workbooks and dashboards for S&OP. .

kinaxis.RapidResponse compare edition features (Source: http://www.cfm ) .com/supply-chain-management-products/rapidresponse-features.

Sign up to vote on this title
UsefulNot useful