1 Demand forecasting excellence
Impossible to see, the future is.
—Yoda, Star Wars
1.1 Why do we forecast demand?
Supply chains are similar to living organisms making a multitude of daily decisions. It is an endless stream: how much, what, and where to buy, source, deliver, and store. To make appropriate decisions and weigh the pros and cons of potential outcomes, we need both qualitative and quantitative insights. In supply chains, these decisions ultimately depend on expected revenues and underlying costs (fixed and variable). At the core of these decisions lies the question of how much demand you can expect in the future. The better you can estimate it, the better your decisions.
In short, supply chains are about making decisions. And demand planners are there to provide meaningful, actionable information to support these. Better forecasting will allow your supply chain to face streamlined operations, fewer shortages, less useless inventory, and more sales. Ultimately, fewer costs and more profits. In some cases—for example, when supply is constrained—better forecasting will result in a competitive advantage as you can better prepare for the future. We can picture a demand planner as a sailor on a boat with a spyglass. You want to bring relevant information about what’s on the horizon to your comrades on the ship—leaving them to decide what’s best to do.