Executive Briefings

A Much More Holistic Approach Is Required in Forecasting & Demand Planning

Analyst Insight: Despite extensive writing from IDC Manufacturing Insights last year extolling the virtues of supply chain responsiveness "” and that in many cases investments in responsiveness might well be better served than investments in forecasting "” manufacturing supply chains continue to rate "making improvements in planning and forecasting" among their top investment priorities. Not that responsiveness isn't important, just that companies believe there is still more progress to be made in things like forecast accuracy. - Simon Ellis, Director, Supply Chain Strategies Practice, IDC Manufacturing Insights

The view of planning is evolving, moving from a disconnected set of individual activities to a continuous business process essential to the performance of the supply chain. Although today a significant number of manufacturing supply chain organizations still operate planning capabilities characterized by multiple, independent business processes and disconnected IT tools, resulting in extended planning horizons, poor interaction between the supply and demand sides of the supply chain, and inadequate service delivery, this is changing. As best-in-class manufacturers take a more holistic view of their planning functions and integrate previously separate processes, they are seeing significant improvements in their business's speed and responsiveness. Further, as the pace of the manufacturing marketplace accelerates, there is increasing pressure on the supply chain organization to be quicker and more agile, supporting the need for more highly integrated planning.

Although the idea of how companies interpret and translate demand into production and fulfillment can be articulated in many different ways, at IDC Manufacturing Insights, we tend to think of it as beginning with the credibility of the forecast and ending with successful fulfillment "” in other words, forecasting to fulfillment. If one accepts, as the central premise, a desire on the part of the manufacturer to fulfill demand in an accurate, timely and cost-effective way, then all of the things that happen in the supply chain are slave to this desired outcome. Although forecast accuracy is often unfairly blamed for customer service failures (or for costly expediting), there is little question that poor supply chain planning is a major contributor to broader supply chain problems.

The notion of "forecast to fulfillment" is at the heart of supply chain planning, in terms of both how manufacturing companies "sense" demand as an input to the forecast and how they "respond" with production plans and factory scheduling:

1. Analytics and sales and operations planning (S&OP) sit at the top and across the planning "stack," in terms of both enabling quick and complete visibility into the planning process and arriving at a cross-functional consensus view of the business.

2. Inventory management/optimization and network design/optimization have an important role across the planning processes "” both are critical inputs and/or constraints to the generation of a practical and productive plan.

3. The initial part of the fulfillment process is very much about planning "” agreeing to the production plan that will deliver to the forecast and actually scheduling the factory.

Fulfillment goes further than planning obviously, into logistics and distribution but that is a discussion for another day.

                                    The Outlook

For companies that have not yet begun this journey, or those that are in their early stages, the essential question is where to focus and how to proceed. The answer lies in the best practices of the early adopter companies that have integrated their planning capabilities and are seeing tangible business results.


Keywords: forecast to fulfillment, forecast accuracy, demand planning, integrated planning, integrated business planning, supply chain planning, inventory management and control

The view of planning is evolving, moving from a disconnected set of individual activities to a continuous business process essential to the performance of the supply chain. Although today a significant number of manufacturing supply chain organizations still operate planning capabilities characterized by multiple, independent business processes and disconnected IT tools, resulting in extended planning horizons, poor interaction between the supply and demand sides of the supply chain, and inadequate service delivery, this is changing. As best-in-class manufacturers take a more holistic view of their planning functions and integrate previously separate processes, they are seeing significant improvements in their business's speed and responsiveness. Further, as the pace of the manufacturing marketplace accelerates, there is increasing pressure on the supply chain organization to be quicker and more agile, supporting the need for more highly integrated planning.

Although the idea of how companies interpret and translate demand into production and fulfillment can be articulated in many different ways, at IDC Manufacturing Insights, we tend to think of it as beginning with the credibility of the forecast and ending with successful fulfillment "” in other words, forecasting to fulfillment. If one accepts, as the central premise, a desire on the part of the manufacturer to fulfill demand in an accurate, timely and cost-effective way, then all of the things that happen in the supply chain are slave to this desired outcome. Although forecast accuracy is often unfairly blamed for customer service failures (or for costly expediting), there is little question that poor supply chain planning is a major contributor to broader supply chain problems.

The notion of "forecast to fulfillment" is at the heart of supply chain planning, in terms of both how manufacturing companies "sense" demand as an input to the forecast and how they "respond" with production plans and factory scheduling:

1. Analytics and sales and operations planning (S&OP) sit at the top and across the planning "stack," in terms of both enabling quick and complete visibility into the planning process and arriving at a cross-functional consensus view of the business.

2. Inventory management/optimization and network design/optimization have an important role across the planning processes "” both are critical inputs and/or constraints to the generation of a practical and productive plan.

3. The initial part of the fulfillment process is very much about planning "” agreeing to the production plan that will deliver to the forecast and actually scheduling the factory.

Fulfillment goes further than planning obviously, into logistics and distribution but that is a discussion for another day.

                                    The Outlook

For companies that have not yet begun this journey, or those that are in their early stages, the essential question is where to focus and how to proceed. The answer lies in the best practices of the early adopter companies that have integrated their planning capabilities and are seeing tangible business results.


Keywords: forecast to fulfillment, forecast accuracy, demand planning, integrated planning, integrated business planning, supply chain planning, inventory management and control