Q.1 a. What is demand forecasting? Explain the basic approach to forecasting demand.
A demand forecasting is the prediction of what will happen to your company's existing product sales. It would be best to determine the demand forecast using a multi-functional approach. The inputs from sales and marketing, finance, and production should be considered. The final demand forecast is the consensus of all participating managers. You may also want to put up a Sales and Operations Planning group composed of representatives from the different departments that will be tasked to prepare the demand forecast.
Determination of the demand forecasts is done through the following steps:
• Determine the use of the forecast
• Select the items to be forecast
• Determine the time horizon of the forecast
• Select the forecasting model(s)
• Gather the data• Make the forecast
• Validate and implement results
The basic approach to forecasting demand1.Understand the objectives of forecasting
2.Integrate demand planning and forecasting
3.Identify major factors that influence the demandforecast
4.Understand and identify customer segments
5.Determine the appropriate forecasting technique
6.Establish performance and error measures for theforecast
Qn (1) b. Define supply chain management.Supply chain management (SCM) is the oversight of materials, information, and finances as theymove in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chainmanagement involves coordinating and integrating these flows both within and among companies. It issaid that the ultimate goal of any effective supply chain management system is to reduce inventory(with the assumption that products are available when needed).
Supply chain management flows can be divided into three main flows:
- The product flow
- The information flow
- The finances flow
The product flow includes the movement of goods from a supplier to a customer, as well as anycustomer returns or service needs. The information flow involves transmitting orders and updatingthe status of delivery. The financial flow consists of credit terms, payment schedules, andconsignment and title ownership arrangements.There are two main types of SCM software: planning applications and execution applications.Planning applications use advanced algorithms to determine the best way to fill an order. Executionapplications track the physical status of goods, the management of materials, and financialinformation involving all parties.Some SCM applications are based on open data models that support the sharing of data both insideand outside the enterprise (this is called the extended enterprise, and includes key suppliers,manufacturers, and end customers of a specific company). This shared data may reside in diversedatabase systems, or data warehouses, at several different sites and companies.By sharing this data "upstream" (with a company's suppliers) and "downstream" (with a company'sclients), SCM applications have the potential to improve the time-to-market of products, reducecosts, and allow all parties in the supply chain to better manage current resources and plan forfuture needs.Increasing numbers of companies are turning to Web sites and Web-based applications as part ofthe SCM solution. A number of major Web sites offer e-procurement
marketplaceswhere manufacturers can trade and even make auction bids with suppliers.