Supply chain forecasting: Collaborative forecasting supports supply chain management

Marilyn M. Helms, Lawrence P. Ettkin, Sharon Chapman

Business Process Management Journal

2000, Vol. 6, No. 5 P. 392-407

 

1)      Why supply chain management?

1. a) To meet competitive challenges of environment
2. b) Broader focus on entire chain and all link
3. c) Strategy, decisions and measurements affect entire supply chain
4. d) Improve customer service
5. e) Squeeze out costs
6. f) Improve efficiency

2)      Collaborative Forecasting

1. a) Bringing SCM to all aspects of the business
2. b) Forecasting accuracy is connected to inventory and customer service levels
3. c) Entire SC participates in decisions about demand

3)      Problems with traditional forecasting

1. a) Forecasts are inexact but no one knows how to improve them
2. b) Uncertainty leads to ways to deal with uncertainty- inventory
3. c) Marketplace is dynamic, yet forecasting is based on historical information
4. d) Often, many forecasts exist within the company: sales, marketing, production…
5. e) Lack of clear communication between functions providing forecasting information
6. f) Planning process is backward: business plan is used to develop the forecast.

4)      Benefits of Collaborative forecasting

1. a) Internal and external knowledge and information is brought together to form a single forecast
2. b) Coordinates the gathering of expertise from diverse sources and uses consensus to develop a more accurate forecast
3. c) Complexity is overcome by cooperative solution seeking
4. d) Baseline of historical information is complemented by current knowledge
5. e) Keeps everyone in the supply chain working from the same plan

5)      The Process

1. a) Select a forecasting champion
2. i) One department of person must be put in charge
3. ii) Someone to take the lead and coordinate differences in personality and experience

iii)     Facilitate cross-functional efforts

1. b) Form the forecast collaboration group
2. i) Membership depends on the organization
3. ii) Should include members of a variety of functional areas

iii)     May include external partners in the supply chain and customers

1. c) Create the foundations
2. i) Decide goals, objectives and immediate needs
3. ii) Identify factors processes and technologies that impact the forecast

iii)     Identify and review relevant sources of information available

(1)   Sales: most recent and accurate information about orders and sales

(2)   Marketing: information on trends in the marketplace

(3)   Operations: information concerning production and distribution constraints

(4)   Forecasting: information about historical baseline and statistical analysis

1. iv) Decide on the process to bring together information

(1)   Monthly review

(a)    Two meetings per month

(b)   First meeting: gathering information

(c)    Second meeting: bringing together different forecasts and arriving at consensus

(2)   Delphi approach

(a)    Baseline forecast is circulated throughout the group

(b)   Changes are passed along

(c)    Team gathers to review the changes and arrive at consensus

(d)   Consensus is presented to management for approval

(3)   Either approach

(a)    Should become a monthly cycle

(b)   Actual and forecasted results should be compared to improve the process

(c)    Outputs should be published

(d)   The cycle results in continuous improvement

1. v) Other aspects

(1)   Results should be measured and participants rewarded to provide incentive

6)      Problems with Collaborative Forecasting and possible solutions

1. a) Requires a variety of personalities and people with different thought processes to work together as a unit
2. i) Set strict rules of order of meetings
3. ii) Rotate group membership

iii)     Encourage strong leadership from the Champion

1. b) Resistance to change and additional tasks/work
2. i) Rewarding for participation
3. ii) Patience: results do not occur overnight

iii)     Full commitment and support of management