In manufacturing world, several activities, if not all, are based on forecasting for future demands. For this reason, manufacturers have always treated demand forecasting as one of the most important foundations for accurate, timely and effective production.
In our last post “How ERP revolutionises manufacturers”, we mentioned about a recent survey by Gatepoint, in which manufacturing executives were interviewed and 49% of them see the need to improve demand forecast capability in order to achieve their revenue target.
The accuracy of forecasts will mostly depend on the accuracy of these inputs – information. Although manufacturers can use different forecasting techniques based on objective methods or subjective methods, there is always a variance between forecasted number and actual number. The higher the variance, the more inaccurate the forecasts.
So, the question is “How to improve forecast accuracy?”
The key to accurate demand forecasting: Improving collaborative forecasting
A collaborative process is well-suited to creating a demand forecast that considers multiple, and sometimes competing factors such as:
- Historical demand, including trends, similar products, and seasonality
- Macro and micro economic trends
- Promotions and advertising
- New product introduction and competitor activities
- Unique insight and judgment of demand and supply chain planning participants
By enhancing collaboration between departments, employees will be provided with relevant data listed above, and through discussions and iterations manufacturers can create forecasts for each product line you sell.
However, most companies use Excel to process data for demand forecasting, but the tool itself is not designed to collect and handle large numbers of data, sharing data amongst numerous participants or tracking individual inputs to the process. This efficiency will eventually force people to make compromises and assumptions in the process and cause critical problems.
Therefore, improved collaborations by implementing an ERP system that enables both internal and external collaboration will be the key to achieve accurate demand forecasting. Internal collaboration provides any historical information as well as market insights; and external collaboration provides better insights about outside information such as purchase orders, periodic forecasts or forecasts acceptance and negotiation for better demand forecasting. (See table)
All manufacturers need a richer, broader collaboration architecture that incorporates deeper business functions and develop teamwork to the next level, connect both internal and external resource to your inner system and work as a united individual to optimise demand forecasting, and ultimately, succeed in a rapidly changing environment.
Wondering what else you can benefit from having a collaborative working culture and how do get it right?