Table Of Content10/21/2013
1
10/21/2013
Introductions – Session Leader
(cid:1) Bob Collins CFPIM, CIRM, CSCP
(cid:1) Director, Professional Development,
APICS (Staff position)
(cid:1) 30 years of industry, consulting, ERP,
education, and professional development
experience
Meet your
session (cid:1) Former APICS Instructor and volunteer –
Chapter, District and APICS Board of
leaders
Directors, APICS President (2003)
Visual -3
Agenda
• 23 major principles of forecasting
• Forecasting in the supply chain environment
• Defining demand management and role of the demand
planner
• Defining forecasting and the forecasting process
• Review of qualitative forecasting techniques
• Review of quantitative forecasting techniques
• Performing forecast decomposition: trends and seasonal
items
• Understanding associative (correlation) models
• Reviewing the tools to chart forecast error
• Detailing why forecasts fail
Visual -4
Visual -4 © APICS CONFIDENTIAL AND PROPRIETARY
2
10/21/2013
Forecasting Themes
“All things pass away;
nothing remains”
-Heraclitus
“Those who have
“Prediction is very
knowledge don’t
difficult, especially if
predict. Those who
it’s about the future”
predict, don’t have
-Niels Bohr
knowledge”
-Lao Tzu
Visual -5
Visual -5 © APICS CONFIDENTIAL AND PROPRIETARY
Principles of Forecasting Management
1. Supply chain management (SCM) refers to getting the
right amount of the right product to where it is needed
while managing productive resources levels to achieve
maximum return on assets
Visual -6
Visual -6 © APICS CONFIDENTIAL AND PROPRIETARY
3
10/21/2013
Forecasting is Everywhere in the Supply Chain
1. Analyzing customer
demand: What should we 3. Production: Are we
make and when? producing the right
amount of the right
product?
2. Materials: Who do we
buy from and how
much?
5. Wholesale/retail: What is 4. Distribution: Where do
the proper assortment and we distribute product?
allocation of merchandise in
stores?
Store
Visual -7
Visual -7 © APICS CONFIDENTIAL AND PROPRIETARY
Principles of Forecasting Management
1. Supply chain management (SCM) refers to getting the
right amount of the right product to where it is needed
while managing productive resources levels to achieve
maximum return on assets
2. Demand management is the process of managing all
independent demands for a company's product lines and
effectively communicating these demands to the master
scheduling and top management production functions
Visual -8
Visual -8 © APICS CONFIDENTIAL AND PROPRIETARY
4
10/21/2013
Defining Demand Management
The process of planning, executing,
controlling, and monitoring the design,
pricing, promotion, and
distribution of products and services to
bring about transactions that meet
organizational and individual needs.
APICS Dictionary, 14th ed.
Visual -9
Visual -9 © APICS CONFIDENTIAL AND PROPRIETARY
Defining Demand Planning
The process of combining statistical forecasting
techniques and judgment to construct demand
estimates for products or services (both high and
low volume; lumpy and continuous) across the
supply chain from the suppliers' raw materials to
the consumer's needs. Items can be aggregated by
product family, geographical location, product life
cycle, and so forth, to determine an estimate of
consumer demand for finished products, service
parts, and services.
APICS Dictionary, 14th ed.
Visual -10
Visual -10 © APICS CONFIDENTIAL AND PROPRIETARY
5
10/21/2013
Principles of Forecasting Management
1. Supply chain management (SCM) refers to getting the
right amount of the right product to where it is needed
while managing productive resources levels to achieve
maximum return on assets
2. Demand management is the process of managing all
independent demands for a company's product lines and
effectively communicating these demands to the master
scheduling and top management production functions
3. Demand forecasting is the process of predicting future
customer demand for a firm's goods and services
Visual -11
Visual -11 © APICS CONFIDENTIAL AND PROPRIETARY
Demand Management Process Model
Planning
Reviewing
Demand
Demand
Performance
Demand Communicating
Management Demand
Prioritizing
Demand
Influencing
Demand
Visual -12
Visual -12 © APICS CONFIDENTIAL AND PROPRIETARY
6
10/21/2013
Principles of Forecasting Management
4. Sales and operational forecasting involves the input from
marketing, sales, production, and financial plans to
determine the disaggregated forecasts of product or
service demand
Visual -13
Visual -13 © APICS CONFIDENTIAL AND PROPRIETARY
Roles of Demand Management Functions
Executive Sales Marketing Product/Brand Mgmt
Role Role Role Role
•Ensure demand •Makevisible sales •Detail marketplace •Detail product plans,
strategies, tactics, plans and volume of changes launches, and phase-
and execution are in demand •Detail marketing outs
place strategy and tactics
Responsibilities Responsibilities Responsibilities Responsibilities
•Detail demandstatus •Detailmonthly •Detail monthly •Detail monthly product
to meet strategic and customer sales anticipated changes plans, product
financial objectives volume and timing to marketing strategy launches,promotions,
•Participate in monthly •Detail monthly and impact on and product phase-outs
demand consensus demand assumptions demand •Communicate delays in
review •Communicate at least •Detail monthly the product launches or
•Provide leadership monthly market assumptions upon changes to product
and oversight problems and which marketing plans impacting
•Ensure demand plan opportunities strategies are based demand
synchronized with •Communicate any •Track and report •Communicate and
company plans significant changes in monthly the impact of update life cycle plans
•Performance demand the marketplace on and plan assumptions
accountability anticipated demand
Visual -14
Visual -14 © APICS CONFIDENTIAL AND PROPRIETARY
7
10/21/2013
Role of the Demand Planner
MMaarrkkeettiinngg
Products/ DDaattaa Customer
Brands Data
Analyze
Statistical Sales
and
Analysis Data
Assimilate
Business
Economy
Plan
Updated Demand Plan
Visual -15
Visual -15 © APICS CONFIDENTIAL AND PROPRIETARY
S&OP and the Demand Plan
S&OP
Meeting
Strategies
Financial Product
Resources
Review Review
Performance
Measurements
Supply Demand
Review Review
Visual -16
Visual -16 © APICS CONFIDENTIAL AND PROPRIETARY
8
10/21/2013
Principles of Forecasting Management
4. Sales and operational forecasting involves the input from
marketing, sales, production, and financial plans to
determine the disaggregated forecasts of product or
service demand
5. Demand forecasting is performed at different levels of
detail incorporating dimensions of period, product, and
customer/location
Visual -17
Visual -17 © APICS CONFIDENTIAL AND PROPRIETARY
Forecasting Levels
Planning Horizon Focus
ANNUAL – STRATEGIC Financial Goals
1-10 years PLANNING and Objectives
MONTHLY – TACTICAL
Product Families
3-12 Months PLANNING
WEEKLY – OPERATIONS Finished
1-52 Weeks PLANNING Goods
DAILY – Manufacturing/
SHORT-TERM
1-365 Purchased
PLANNING
Days items
Visual -18
Visual -18 © APICS CONFIDENTIAL AND PROPRIETARY
9
10/21/2013
Examples of Forecasting by Levels
Forecast Required by
Expected corporate growth for the Executive team:investment, profit,
next 5 years (long range) and asset/capital planning
Product life cycles (long range) Marketing:product planning
Total production required for next Manufacturing: plant expansion
five years (long range) program
Sales:quotas
Current year’s sales of individual Finance:expense budgets
products in family groupings Manufacturing: labor/machine
(medium range) capacities
Inventory: purchasing and storage
Manufacturing: assembly schedules
and dispatching priorities
Sales for next week (short term)
Materials: purchase order release
and follow-up
Visual -19
Visual -19 © APICS CONFIDENTIAL AND PROPRIETARY
Principles of Forecasting Management
4. Sales and operational forecasting involves the input from
marketing, sales, production, and financial plans to
determine the disaggregated forecasts of product or
service demand
5. Demand forecasting is performed at different levels of
detail incorporating dimensions of period, product, and
customer/location
6. Forecasting is a process that has as its objective the
prediction of future events or conditions
Visual -20
Visual -20 © APICS CONFIDENTIAL AND PROPRIETARY
10
Description:APICS Dictionary , 14th ed. The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services
