A second organizational strategy is the forecast-driven enterprise. Simply put, this strategy is one in which the nucleus firm, usually their manufacturer, utilizes a forecast, an estimate of future demand, as the basis of its organizational strategy.<\/p>\n\n\n\n
Here is the complicating factor: It is difficult to know what customer requirements will be from day to day, month to month, quarter to quarter, and so on. For instance, if a manufacturer was guaranteed that its wholesale or retail customers were going to need 1,000 SKUs (stock keeping units) every Wednesday afternoon, then getting those products to customers at the right time and place would be a matter of simple calculation based upon lead times for production and delivery. In turn, the manufacturer would look at the bill of material, determine the lead time for each, and submit schedules to its suppliers. Unfortunately, it\u2019s difficult to predict even the most stable demand\u2014say, for a product like diapers. There is some variability in demand for diaper, even though they aren’t subject to seasonal style changes or rapid peaks and valleys in response to outside influences affecting ability to pay. (That\u2019s why Procter & Gamble cooperates with Wal-Mart to plan for demand and replenishment of diapers.) The chain of demand begins at the far retail end of the supply chain and works its way back toward the source of raw materials used in making the product. The traditional way of attempting to satisfy this demand is to forecast it.<\/p>\n\n\n\n
In this retail example, forecasting along the chain works like this:<\/p>\n\n\n\n
How effective is this supply chain strategy? Let\u2019s say you don\u2019t want to be placing large bets on the accuracy of all those forecasts. Here\u2019s what actually happens:<\/p>\n\n\n\n
As mentioned earlier, this pattern of variability is called the bull-whip effect, and it affects all manner of supply chains that are based on serial forecasting by each independent division or firm that touches the product as it travels from raw material to finished retail item.<\/p>\n","protected":false},"excerpt":{"rendered":"
A second organizational strategy is the forecast-driven enterprise. Simply put, this strategy is one in which the nucleus firm, usually their manufacturer, utilizes a forecast, an estimate of future demand, as the basis of its organizational strategy. Here is the complicating factor: It is difficult to know what customer requirements will be from day to…<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-102645","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"\n