Supply Chain

Management
 Project 6
Demand forecasting
in supply chain
environment
Lecturer: Li Zhe
 learning target

social competence method ability

Professional ability

 The  Carry out  Accurate

Principle of communicatio and timely
Cognitive n, discovery,
Need organization collection,
Variation and sorting and
Amplificatio coordination analysis of
n and the in supply problems
Long Whip chain and put
Effect management forward
in accordance reasonable
 Grasp the
with the solutions
content
professional
 Task decomposition
THE LONG WHIP EFFECT AND
TASK ONE ITS HARM
THE LONG WHIP EFFECT
AND ITS WEAKENING
WEAKENING MEASURES FOR
FOR MEASURES
THE LONG WHIP EFFECT
ANSW
ER TASK TWO CONTENTS AND PROCEDURES OF
CHAI CONTENTS AND DEMAND FORECASTING IN
N METHODS OF DEMAND SUPPLY CHAIN ENVIRONMENT
RING FORECASTING IN SUPPLY
TERRI APPLICATION OF SUPPLY CHAIN
CHAIN ENVIRONMENT
TORY DEMAND FORECASTING
DOW METHOD
N
OF
PRACTICE ONE DEMAND FORECASTING
NEED
METHOD APPLICATION
BEGGI PRACTICE TWO ANALYSIS OF INFLUENCING
NG FACTORS OF SUPPLY CHAIN
PRE
 Learn to import
• 　　 from a hotel management
A and B both graduated
school at the same time and entered the same hotel
together. However, after three years, the
difference between the two is very big. A is
already the deputy general manager of the hotel,
while B is still a General staff.
• At a class reunion, B said to A : "I just don't
understand why we are standing on the same
starting line, but three years have made such a
big difference between us? Do you have anything A
trick?" B asks A for his success.
• A said: "Actually, it's not a trick, but from the
first day I entered the hotel, I planned a
development plan for myself:
 Learn to import

• After three months, you will be an excellent

employee, after half a year, you will be a foreman, a
year later a supervisor, a manager after two years, a
deputy general manager after three years, and a
general manager after five years.
• After making a plan, I use it to motivate myself at
work. For example, if I plan to be a foreman after
half a year, then before I become a foreman, I will
be strict with the foreman’s work standards in terms
of thinking, behavior, and daily work. Ask yourself,
although I am not a foreman yet, but as long as my
quality in all aspects has reached the foreman's
standard and fulfilled the requirements of the
foreman, I believe that in the near future, I will
 Learn to import
• Then, after the first plan was realized, the second
and third plans were realized in the same way. When I
became the foreman, I demanded myself with the
standard of the supervisor, and soon I became the
supervisor; When I was a supervisor, I demanded myself
to be a manager. Later, I became a manager. Until now,
although I have become the deputy general manager of
the hotel, I still haven’t achieved my goals. If you
continue to work hard on your goals, everything will
be established in advance, and if you don't plan, you
will fail!
 without prejudging the
waste!
 Forewarned !
is forearmed, without prejudging the waste!
 That is to say, to do anything, if you do not plan,
you are actually planning to fail.
 So don't be afraid to make a plan. Although the goal
cannot be changed casually, the plan can be changed or
expanded as needed, but first of all, there must be a
plan. Having a plan is a manifestation of
determination.
 Push Supply Chain System
( 1 ) Definition of " push " supply chain :

Guided by the company's own products, also known

as "product-oriented" or "stock-oriented". That is,
predict the market → manufacture the product → bring
it to the market . Through market prediction, the
priority order of a certain product is obtained, a
certain production
supplie manufactquantity and inventory
Distribut retailer standards
custom are
r urer or er
formulated, and finally the promotion is carried out, or
Push Supply Chain System
the product is wholesaled
Diagramto the retailer, and finally
to the customer.
 Push Supply Chain System
Push Supply Chain Defects :
Based on market forecasts, in order to prevent out-of-
stocks damage, demand fluctuations are gradually
amplified, and the total demand is gradually increasing.
The order received by the final manufacturer deviates
significantly from the actual customer demand, resulting
in a long-whip effect .

The long-whip effect refers to a situation in

which the fluctuations in demand continue to increase as
one moves upstream along the supply chain . The main
 Pull supply chain system

( 2 ) Definition of " pull " supply chain :

Production is based on the order obtained by the

enterprise, that is, production is demand-oriented
rather than forecast-oriented, also known as "customer-
oriented" or "order-oriented". That is, receiving
customer
supplieorders (pulling Distribu
manufac to customers) → supply
retailer chain
custom
r turer tor er
operation . It is a model of "production based on sales"
Pull supply chain system diagram
.
 Task 1 Longwhip Effect and
Its Weakening Measures

one The long whip effect

and its harm

t Weakening
measures for the
w long whip effect
o
 1. The long whip effect and
its harm

1 The principle of the whip effect

2Harm and causes of long whip effect

1.1 The principle of long
whip effect
 1.1 The principle of long
whip effect

The asynchrony of demand in the supply chain illustrates a

common phenomenon in supply chain management: "what
you see is not what you see". The magnifying effect of this
information distortion is very much like a whipped bullwhip
on the graph display, so it is vividly called the "long whip
effect" .
 Case: Procter &
Gamble
• In 1995 , when P&G managers inspected the order
distribution of disposable baby diapers, they found
that the consumption of the product by infants in a
certain area was relatively stable, and the sales
volume of retailers did not fluctuate much. However,
there have been large fluctuations. During the same
period, the order quantity of manufacturers to raw
material suppliers has fluctuated even more. If this
information distortion is superimposed with the
uncertain factors in the manufacturing process of the
 A group of people, who
play the roles of
manufacturer, wholesaler
and retailer, communicate
with each other only
through the order /
delivery process. Each
role has independent
autonomy and can decide
Knowledge link beer game how many orders should be
placed upstream and how
much goods should be sold
downstream. As for the end
consumer, it is
automatically played by
the game. And, only
retailers can go directly
to consumers.
 1.2 The harm caused by the
long whip effect to
enterprises
( 1 ) Increased production cost
( 2 ) Increased inventory cost

( 3 ) Extending the supply chain supply period

( 4 ) Increase the transportation cost of the supply
chain
( 5 ) Increased labor costs associated with supply
chain and delivery and purchases

( 6 ) Reduce the supply level of products in the

supply chain, resulting in more shortage of
supply
 1.3 Reasons for the formation
of the long whip effect
( 1 ) Demand forecast revision
( 2 ) Ordering decision (periodic, order-driven,
MRP tight)

( 3 ) Price fluctuations ( Forward Buy in

advance )
( 4 ) Shortage game
( 5 ) Inventory liability imbalance

( 6 ) Coping with environmental variation

Second, the weakening measures
of the long whip effect

1Weakening measures for the long whip effe

 2.1 Weakening measures of long
whip effect
( 1 ) Improve the accuracy of supply chain
forecasting
① .Can communicate with downstream enterprises
(preferably the enterprise that undertakes the final
delivery work) in time to share market / demand
information.
② .Make sales forecast together with upstream and
downstream enterprises, and make the enterprise maintain
this forecast conclusion all the time
③ . Try to use an accurate prediction model and share
the prediction results within the organization
 2.1 Weakening measures of long
whip effect

( 4 ) Order hierarchical management

( 5 ) Reasonably share inventory

( 6 ) Shorten lead time

( 7 ) Adopt business outsourcing
( 8 ) Establishing partners
 Case: Dell Inc.

• Dell ( Dell ) company has formed an efficient

information network through the Internet, telephone,
fax, etc., customers can directly place orders with
the company for assembly and supply, so that ordering,
manufacturing and supply are completed in "one line",
and the realization of suppliers Direct transactions
with customers effectively prevent the occurrence of
the long whip effect.
Task 2: Contents and Methods of
Demand Forecasting in Supply Chain
Environment
Contents and
one procedures of
demand forecasting
in supply chain
environment

Application of supply two

and demand
forecasting method
 of demand forecasting in
the supply chain
environment
tents 1
of Demand Forecasting in Supply Chain Environme

2 Demand Forecasting in a Supply Chain E

Procedures for

3
d forecasting should pay attention to information sh
forecast in the supply chain
environment
Supply chain uncertainty → long whip effect
① Uncertainty caused by the level of demand
forecast.
② Availability, transparency and reliability of
decision-making information.

③ The influence of the decision-making process,

especially the influence of the decision-maker's
psychology.
forecast in the supply chain
environment
( 1 ) Market demand forecast
① . Forecast of total market demand for
commodities

② .Market Demand Composition Forecast

③ .Consumer buying behavior prediction

( 2 ) Market resource forecast

① .Industrial product forecast

② . Forecast of agricultural and sideline products

③ . Forecast of imported products
forecast in the supply chain
environment
( 3 ) Marketing mix forecast
① .Product forecast
② .Price forecast

③ .Sales channel forecast

④ .Promotion forecast
Forecasting in Supply Chain
Environment
 should pay attention to
information sharing
( 1 ) Methods to achieve information sharing
①.Strengthen the sharing and exchange of
information; ②.Reduce the process of information
transmission and speed up the speed of information
flow; ③.Establish a strategic partnership
 should pay attention to
information sharing
( 2 ) Patterns of Information Sharing
① .Peer -to-peer sharing mode
Through the internal information system
established by the partners, one enterprise directly
stores the information transmitted by the other
enterprise in its own database. Information is directly
transmitted from the supply side to the demand side
without going through other data conversion or
storage centers
 should pay attention to
information sharing
( 2 ) Patterns of Information Sharing
② .Information centralized management mode
The shared information of the supply chain is
centralized in a public database, and each enterprise
operates on it according to the authority, and
exchanges information with multiple partners. There
are two other types.

third party mode : Third-party information

companies provide public databases.
Information platform mode: The third-party
 should pay attention to
information sharing
( 2 ) Patterns of Information Sharing
③ . Integrated information sharing model
A synthesis of the peer-to-peer model and the
centralized information management model.
Different information sharing modes are adopted for
different information sharing areas, and a main
information platform is built as the core.
 chain demand forecasting
method

1 Qualitative Forecasting

2 quantitative forecasting
 The scope of supply
profit planning ;
planning across
enterprises
chain forecasting
 Production
Human Resource
Planning
resource
scheduling ; Financial
Planning
 Wholesale price
negotiation ; Product sales
forecast
 In and out
inventory Call service
arrangements ; center planning
 Simplified Promotional
throughput rules expense
; planning
Project planning ; Network
bandwidth
utilization
Customer service
rules ;  Seasonal
demand
Site Rules ;
 prediction
method
( 1 ) Qualitative Forecasting
Features: A prediction method that does not rely
on mathematical models.

Scope of application: The influencing factors of

the prediction object are difficult to be prioritized, or
difficult to simulate with mathematical expressions.
Forecasting method: The forecaster makes
estimates and speculations on the trend, direction
and major turning points of the development of
things based on their own business knowledge,
( 1 ) Buyer Intent Survey
condition:
① .The purchase intention of the buyer is clear and
definite

② .This intention will be transformed into customer

purchase action
③ .The buyer is willing to tell the investigator about
his intention

Advantage:
① .Investigators can learn about new ways of thinking
about various issues without public release of data
( 2 ) Salesperson Comprehensive Opinion Act
Advantage:
① .Sales personnel have a comprehensive and
profound understanding of the buyer's intention
② .Sales personnel participate in enterprise
forecasting and have greater confidence in the
assigned amount

③ . Various sales forecasts by product, region,

customer or salesperson can be obtained

Note: Forecasts made by salespeople must be further

( 2 ) Salesperson Comprehensive Opinion Act
reason:
① .The judgment will be biased, for example, it is
affected by the success or failure of its recent sales
② . Sales staff may not understand the economic
development situation or the overall marketing plan
of the company

③ . In order to make its sales exceed the quota

target, the salesperson may deliberately push down its
expected number
( 3 ) expert forecasting
concept:
Taking experts as the object of obtaining information,
using the knowledge and experience of experts,
considering the social environment of the predicted
object, directly analyzing and researching and seeking
its characteristic laws, and speculating on the future.
type:
① .Personal judgment

② .Collective judgment method

 Quantitative
prediction
method
( 2 ) quantitative forecasting
Features: Prediction methods relying on
mathematical models.

Scope of application: The primary and secondary

influencing factors of the predicted object are
obvious, or it needs to be simulated by mathematical
expressions.

Prediction method: Establish an appropriate

mathematical model and substitute the collected
data.
 Quantitative
prediction
method
( 1 ) Seasonal Index Forecasting
Features: Due to the influence of natural climate,
production conditions, living habits and other
factors, some market phenomena show periodic
changes in a certain period of time with seasonal
changes.

Scope of application: agricultural and sideline

products, holiday commodities.

method of prediction:
① .The seasonal index is calculated directly
 analysis prediction
method
( 2 ) regression analysis prediction method
Features: On the basis of analyzing the
relationship between independent variables and
dependent variables of market phenomena, establish
regression equations between variables, and make
prediction models to predict dependent variables
according to independent variables.
Advantages: specific, effective, and high in use
value.
Prediction step:
 Think about
it ...
How to make predictions
more accurate?
 Project
evaluation

self- Summ extracu

test arize rricular
Evalua improv expand
te e