DEMAND FORECASTING IN A SUPPLY CHAIN

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DEMAND FORECASTING IN A SUPPLY CHAIN

  1. 1. DEMAND FORECASTING IN A SUPPLY CHAIN Moving from Supply Chain to Demand Management
  2. 2. AGENDA <ul><li>INTRODUCTION (7.1) </li></ul><ul><li>UNDERSTANDING (7.2 – 7.4) </li></ul><ul><ul><li>Characteristics </li></ul></ul><ul><ul><li>Components </li></ul></ul><ul><ul><li>Basic Approach </li></ul></ul>
  3. 3. AGENDA <ul><li>Methods (7.5) </li></ul><ul><ul><li>Static </li></ul></ul><ul><ul><li>Adaptive </li></ul></ul><ul><li>Measures of Forecast Error (7.6) </li></ul><ul><li>Summary and Conclusions </li></ul>
  4. 4. INTRODUCTION <ul><li>Role in SCM </li></ul><ul><ul><li>Move </li></ul></ul><ul><ul><ul><li>From Managing Supply </li></ul></ul></ul><ul><ul><ul><li>To Managing Demand </li></ul></ul></ul><ul><ul><li>Basis of All Planning </li></ul></ul>
  5. 5. INTRODUCTION <ul><li>Decision Areas (examples) </li></ul><ul><ul><li>Production </li></ul></ul><ul><ul><ul><li>Scheduling </li></ul></ul></ul><ul><ul><ul><li>Inventory </li></ul></ul></ul><ul><ul><ul><li>Aggregate Planning </li></ul></ul></ul>
  6. 6. INTRODUCTION <ul><li>Decision Areas (examples) </li></ul><ul><ul><li>Marketing </li></ul></ul><ul><ul><ul><li>Sales Force Allocation </li></ul></ul></ul><ul><ul><ul><li>Promotion </li></ul></ul></ul><ul><ul><ul><li>NPD </li></ul></ul></ul>
  7. 7. INTRODUCTION <ul><li>Decision Areas (examples) </li></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><ul><li>Capital </li></ul></ul></ul><ul><ul><ul><li>Cash Flow </li></ul></ul></ul>
  8. 8. INTRODUCTION <ul><li>Decision Areas (examples) </li></ul><ul><ul><li>Personnel </li></ul></ul><ul><ul><ul><li>Workforce Planning </li></ul></ul></ul><ul><ul><ul><li>Hiring </li></ul></ul></ul><ul><ul><ul><li>Layoffs </li></ul></ul></ul>
  9. 9. AGENDA <ul><li>UNDERSTANDING (7.2 – 7.4) </li></ul><ul><ul><li>Characteristics </li></ul></ul><ul><ul><li>Components </li></ul></ul><ul><ul><li>Basic Approach </li></ul></ul>
  10. 10. UNDERSTANDING <ul><li>Forecast Characteristics </li></ul><ul><ul><li>Always Wrong </li></ul></ul><ul><ul><ul><li>Expected Value – Central Tendency </li></ul></ul></ul><ul><ul><ul><li>Dispersion </li></ul></ul></ul><ul><ul><ul><ul><li>Forecast Error </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Long v Short </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Aggregate v Disaggregate </li></ul></ul></ul></ul>
  11. 11. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Past as Predictor of Future </li></ul></ul><ul><ul><ul><li>Maybe </li></ul></ul></ul><ul><ul><ul><li>Useful </li></ul></ul></ul><ul><ul><ul><ul><li>Supply Chain Management </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Demand Management (?) </li></ul></ul></ul></ul>
  12. 12. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Past as Predictor of Future </li></ul></ul><ul><ul><ul><li>Factors (examples) </li></ul></ul></ul><ul><ul><ul><ul><li>Response Time </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Marketing Actions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>State of Economy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Etc. </li></ul></ul></ul></ul>
  13. 13. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Types </li></ul></ul><ul><ul><ul><li>Qualitative </li></ul></ul></ul><ul><ul><ul><ul><li>Subjective </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Judgment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lacking </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Past </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Expert Intelligence </li></ul></ul></ul></ul></ul>
  14. 14. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Types </li></ul></ul><ul><ul><ul><li>Time Series </li></ul></ul></ul><ul><ul><ul><ul><li>Historical Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>No Change in Underlying Factors </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Appropriate </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Stable </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Basic Patter Does Not Fluctuate </li></ul></ul></ul></ul></ul>
  15. 15. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Types </li></ul></ul><ul><ul><ul><li>Causal </li></ul></ul></ul><ul><ul><ul><ul><li>Past not Predictor of Future </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cause more Relevant than Correlation </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Environmental Changes </li></ul></ul></ul></ul>
  16. 16. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Types </li></ul></ul><ul><ul><ul><li>Simulation </li></ul></ul></ul><ul><ul><ul><ul><li>Imitate Stimulus, Response, Outcome </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Consider </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Time Series </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Causal </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Qualitative </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Heuristics and Optimization </li></ul></ul></ul></ul></ul>
  17. 17. UNDERSTANDING <ul><li>Components </li></ul><ul><ul><li>Past as Predictor of Future </li></ul></ul><ul><ul><ul><li>Factors (examples) </li></ul></ul></ul><ul><ul><ul><ul><li>Response Time </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Marketing Actions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>State of Economy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Etc. </li></ul></ul></ul></ul>
  18. 18. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Objective </li></ul></ul><ul><ul><ul><li>Support Decision </li></ul></ul></ul><ul><ul><ul><li>Link to Action </li></ul></ul></ul><ul><ul><ul><li>Shared ( CPFR ) </li></ul></ul></ul><ul><ul><ul><li>Relevant Horizon </li></ul></ul></ul>
  19. 19. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Integrate Planning </li></ul></ul><ul><ul><ul><li>Capacity </li></ul></ul></ul><ul><ul><ul><li>Production </li></ul></ul></ul><ul><ul><ul><li>Promotion </li></ul></ul></ul><ul><ul><ul><li>Purchasing </li></ul></ul></ul><ul><ul><ul><li>Other </li></ul></ul></ul>
  20. 20. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Identify Key Factors </li></ul></ul><ul><ul><ul><li>Sales v Demand </li></ul></ul></ul><ul><ul><ul><li>Nature of Relationship </li></ul></ul></ul><ul><ul><ul><ul><li>Primary </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Derived </li></ul></ul></ul></ul><ul><ul><ul><li>Covariates </li></ul></ul></ul><ul><ul><ul><ul><li>Demand </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Supply </li></ul></ul></ul></ul>
  21. 21. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Fundamentally </li></ul></ul><ul><ul><ul><li>Service Output Demands (SOD) </li></ul></ul></ul><ul><ul><ul><li>Service Output Supply (SOS) </li></ul></ul></ul>
  22. 22. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Appropriate Techniques </li></ul></ul><ul><ul><ul><li>Vary by </li></ul></ul></ul><ul><ul><ul><ul><li>Product </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Service </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Segment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Horizon </li></ul></ul></ul></ul><ul><ul><ul><li>Will be Required </li></ul></ul></ul>
  23. 23. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Monitor Performance </li></ul></ul><ul><ul><ul><li>Evaluate </li></ul></ul></ul><ul><ul><ul><ul><li>Accuracy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Timeliness </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Value </li></ul></ul></ul></ul>
  24. 24. UNDERSTANDING <ul><li>Basic Approach </li></ul><ul><ul><li>Monitor Performance </li></ul></ul><ul><ul><ul><li>Compare </li></ul></ul></ul><ul><ul><ul><ul><li>Forecast v Actual </li></ul></ul></ul></ul><ul><ul><ul><ul><li>When Available v When Needed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cost v Benefit </li></ul></ul></ul></ul>
  25. 25. AGENDA <ul><li>(Time Series) Methods (7.5) </li></ul><ul><ul><li>Static </li></ul></ul><ul><ul><li>Adaptive </li></ul></ul>
  26. 26. METHODS <ul><li>Static </li></ul><ul><ul><li>Mixed </li></ul></ul>
  27. 27. METHODS <ul><li>Static </li></ul><ul><ul><li>Forecast </li></ul></ul>
  28. 28. METHODS <ul><li>Static </li></ul><ul><ul><li>Level and Trend </li></ul></ul><ul><ul><ul><li>Deseasonalize Demand </li></ul></ul></ul><ul><ul><ul><li>Periodicity </li></ul></ul></ul>
  29. 29. METHODS <ul><li>Static </li></ul><ul><ul><li>Level and Trend </li></ul></ul><ul><ul><ul><li>Periodicity </li></ul></ul></ul><ul><ul><ul><ul><li>P Even </li></ul></ul></ul></ul>
  30. 30. METHODS <ul><li>Static </li></ul><ul><ul><li>Level and Trend </li></ul></ul><ul><ul><ul><li>Periodicity </li></ul></ul></ul><ul><ul><ul><ul><li>P Odd </li></ul></ul></ul></ul>
  31. 31. METHODS <ul><li>Static </li></ul><ul><ul><li>Forecast Linear Relationship </li></ul></ul>
  32. 32. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Mixed </li></ul></ul>
  33. 33. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Basic Forecast </li></ul></ul>
  34. 34. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Basic Forecast Steps </li></ul></ul><ul><ul><ul><li>Initialize </li></ul></ul></ul><ul><ul><ul><li>Forecast </li></ul></ul></ul><ul><ul><ul><li>Measure Error </li></ul></ul></ul><ul><ul><ul><li>Adapt </li></ul></ul></ul>
  35. 35. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Basic Forecast Steps </li></ul></ul>
  36. 36. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Basic Forecast Steps </li></ul></ul>
  37. 37. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Moving Average </li></ul></ul>
  38. 38. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Simple Exponential Smoothing </li></ul></ul>
  39. 39. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Trend Corrected (Holt) </li></ul></ul>
  40. 40. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Trend Corrected (Holt) </li></ul></ul>
  41. 41. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Trend Season Corrected (Winter) </li></ul></ul>
  42. 42. METHODS <ul><li>Adaptive </li></ul><ul><ul><li>Trend Season Corrected (Winter) </li></ul></ul>
  43. 43. AGENDA <ul><li>Forecast Error (7.6) </li></ul>
  44. 44. FORECAST ERROR <ul><li>Why </li></ul><ul><ul><li>Accuracy of Systematic Component </li></ul></ul><ul><ul><li>Contingency Planning </li></ul></ul>
  45. 45. FORECAST ERROR <ul><li>Measures </li></ul>
  46. 46. FORECAST ERROR <ul><li>Measures </li></ul>
  47. 47. FORECAST ERROR <ul><li>Measures </li></ul>
  48. 48. FORECAST ERROR <ul><li>Measures </li></ul>
  49. 49. FORECAST ERROR <ul><li>Measures </li></ul>
  50. 50. FORECAST ERROR <ul><li>Measures </li></ul>
  51. 51. SUMMARY AND CONCLUSIONS

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