{"id":51334,"date":"2019-01-05T13:33:33","date_gmt":"2019-01-05T08:03:33","guid":{"rendered":"https:\/\/www.vskills.in\/certification\/blog\/?p=51334"},"modified":"2024-04-03T13:13:52","modified_gmt":"2024-04-03T07:43:52","slug":"forecasting-and-supply-chain-management","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/forecasting-and-supply-chain-management\/","title":{"rendered":"Forecasting and Aggregate Planning"},"content":{"rendered":"

Forecasting and Supply Chain Management
\n<\/strong><\/h2>\n

Role of Forecasting in a Supply Chain Management<\/h3>\n

When we talk about Forecasting and Supply Chain management we consider the first component i.e., forecasting which is a very important tool used in every department of a company, like production, marketing, finance and human resources department. The aggregate of these demands tends to give an accurate forecast and helps to take accurate decisions. This aggregation of the demand forecasts of each department in a firm is called as Collaborative Forecasting, which helps the company to enhance decision making.<\/p>\n

Forecasting decisions in each of the departments are,<\/p>\n

\u2022 Human Resource – Manpower planning
\n\u2022 Marketing – Promotions, sales force allocation and new product introduction
\n\u2022 Production – Purchasing, scheduling and inventory management
\n\u2022 Finance – Investments and budgeting<\/p>\n

It is very important for any company to have collaborative forecasting within its various departments and also other companies in the supply chain.<\/p>\n

\"Forecasting<\/a>
Forecasting and Supply Chain Management<\/figcaption><\/figure>\n

Characteristics of a Forecasting<\/h3>\n

Some of the major characteristics of a forecasting are,<\/p>\n

\u2022 Forecast errors: Forecasts must always include both an expected value of the forecast and the measure of a forecast error.
\n\u2022 Accuracy of forecasts: Long term forecasts have a larger standard deviation of error with respect to the mean than short term forecasts.
\n\u2022 Information distortion: it\u2019s often observed that as we move up the supply chain, the degree of information distortion decreases.
\nComponents and Methods of Forecasting
\nIt is very crucial for an organization to identify the factors affecting the future demand of products and services by customers.
\n\u2022 Past demand
\n\u2022 Lead time involved of the product
\n\u2022 Economy
\n\u2022 Advertising decisions
\n\u2022 Competitors<\/p>\n

Methods of Forecasting and Supply Chain Management<\/h3>\n

\u2022 Qualitative Methods: Highly subjective in nature and rely deeply on human judgement.
\n\u2022 Time Series Methods\/Analysis: Involve the use of available historical data. They assume the past results as the indicator of the future demand as well.
\n\u2022 Causal Methods: Assume that the demand forecasts are correlated with certain environmental factors like the economy or market rates
\n\u2022 Simulation: Simulation can be used, by combining time series methods and casual methods to arrive at a forecast.<\/p>\n

Problems Area<\/h3>\n

In order to develop an aggregate plan, the company needs to define the aggregate planning horizon, which is the time period over which the aggregate plan needs to produce a solution. It should also define the duration of each period in the planning horizon and lastly, the information required in order developing the aggregate plan.<\/p>\n

Required Strategies<\/h3>\n

The aggregate planner must be able to make tradeoffs between the capacity, inventory, and the unmet demand costs. If the costs of changing the capacity are very high, then a company may build some inventory and also carry some unmet orders, but if the costs of changing the capacity is low, then it may not build up any inventory or carry any unmet orders.<\/p>\n

Managing Supplies<\/h3>\n

It is important for company has to vary its supply from time to time by controlling these two departments or functions of the company.
\nCapacity management (production and operations department)
\n\u2022 Workforce time flexibility
\n\u2022 Seasonal workforce
\n\u2022 Dual facility usage
\n\u2022 Subcontracting
\n\u2022 Merging product flexibility in the production process<\/p>\n

Managing Demand<\/h3>\n

These promotions and pricing tactics that are used by companies are done with an objective of maximising
\nRevenue. The supply chain manager must know how to come up with promotions and effective price
\nChanges. There are four major factors that affect the timing of a trade promotion:
\n\u2022 Impact of the promotion on demand
\n\u2022 Product margins
\n\u2022 Holding costs
\n\u2022 Change in capacity costs<\/p>\n

Implementing Solutions<\/h3>\n

Collaborative efforts of the marketing production and operations departments, with the co-operation of senior officials are a must to gain maximum from predictable variability, which the following points shall explain –<\/p>\n

\u2022 Planning and co-ordination across the supply chain: In order to achieve this planning collaboration within the company, incentives are to be provided: both incentives related to revenue for the marketing department and incentives related to the costs for the production department.
\n\u2022 Considering predictable variability before taking any decision: Decisions regarding building new facilities, types and pricing of products regarding the company are strategic decisions taken by the firm.
\n\u2022 Pre-empting predictable variability and not reacting to it: This is usually a concern for the production and operations department, which tries to meet the demand fluctuations due to predictable variability in the market by managing the supply.<\/p>\n","protected":false},"excerpt":{"rendered":"

Forecasting and Supply Chain Management Role of Forecasting in a Supply Chain Management When we talk about Forecasting and Supply Chain management we consider the first component i.e., forecasting which is a very important tool used in every department of a company, like production, marketing, finance and human resources department. The aggregate of these demands…<\/p>\n","protected":false},"author":1,"featured_media":51466,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1532],"tags":[6905,6906,975,6898],"class_list":["post-51334","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-logistics-and-supply-chain-management","tag-forecasting-and-scm","tag-logistics-and-scm","tag-supply-chain-management","tag-supply-chain-planning"],"acf":[],"yoast_head":"\nForecasting and Aggregate Planning - Vskills Tutorial<\/title>\n<meta name=\"description\" content=\"Learn more about Forecasting and Supply Chain Management covering all the concepts of Logistics and SCM. 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