• What is demand forecasting?

Demand Forecasting refers to the process of predicting the future demand for the
firm’s product.
In other words, demand forecasting is comprised of a series of steps that involves the
anticipation of demand for a product in future under both controllable and non-
controllable factors.
Forecast is becoming the sign of survival and the language of business. All
requirements of the business sector need the technique of accurate and practical
reading into the future. Forecasts are, therefore, very essential requirement for the
survival of business. Man¬agement requires forecasting information when making a
wide range of decisions.

• Give Some of the popular definitions of demand forecasting

According to Evan J. Douglas, “Demand estimation (forecasting) may be defined as a
process of finding values for demand in future time periods.”
In the words of Cundiff and Still, “Demand forecasting is an estimate of sales during a
specified future period based on proposed marketing plan and a set of particular
uncontrollable and competitive forces.”
Demand forecasting enables an organization to take various business decisions, such
as planning the production process, purchasing raw materials, managing funds, and
deciding the price of the product

• What is the Significance of Demand Forecasting?

Demand plays a crucial role in the management of every business.
It helps an organization to reduce risks involved in business activities and make
important business decisions.
Apart from this, demand forecasting provides an insight into the organization’s capital
investment and expansion decisions
Significance of Demand Forecasting:
The significance of demand forecasting is shown in the following points:
• Fulfilling objectives
• Preparing the budget
• Stabilizing employment and production
• Expanding organizations
• Taking Management Decisions
• Evaluating Performance
• Helping Government

• What are the Forecasting Techniques?

Qualitative forecasting is based on opinion and intuition.
Quantitative forecasting uses mathematical models and historical data to make
forecasts.
Time series models are the most frequently used among all the forecasting models.

Qualitative Forecasting Methods

Generally used when data are limited, unavailable, or not currently relevant. Forecast
depends on skill & experience of forecaster(s) & available information.
Four qualitative models used are:
Jury of executive opinion
Delphi method
Sales force composite
Consumer survey

Quantitative Methods
Time series forecasting- based on the assumption that the future is an extension of the
past. Historical data is used to predict future demand.
Associative forecasting- assumes that one or more factors (independent variables)
predict future demand.
It is generally recommended to use a combination of quantitative and qualitative
techniques.
Components of Time Series
Data should be plotted to detect for the following components:
Trend variations: either increasing or decreasing
Cyclical variations: wavelike movements that are longer than a year
Seasonal variations: show peaks and valleys that repeat over a consistent interval such
as hours, days, weeks, months, years, or seasons
Random variations: due to unexpected or unpredictable events

• What is Forecast Accuracy?

The formula for forecast error, defined as the difference between actual quantity and
the forecast, follows:
Forecast error, et = At - Ft
 where
et = forecast error for Period t
At = actual demand for Period t
Ft = forecast for Period t
Forecast Accuracy
Several measures of forecasting accuracy follow:
Mean absolute deviation (MAD)- a MAD of 0 indicates the forecast exactly predicted
demand.
Mean absolute percentage error (MAPE)- provides perspective of the true magnitude
of the forecast error.
Mean squared error (MSE)- analogous to variance, large forecast errors are heavily
penalized

Collaborative Planning, Forecasting and Replenishment (CPFR)

What is CPFR?
Definition: According to the Voluntary Inter-industry Commerce Standards (VICS)
Association, CPFR is “a set of business processes that entities in a supply chain can
use for collaboration on a number of retailer/manufacturer functions towards overall
efficiency in the supply chain.”
CPFR is a registered trademark of the VICS Association.
According to CSCMP…
The Council of Supply Chain Management Professionals (CSCMP) describes CPFR
as:
A concept that aims to enhance supply chain integration by supporting and assisting
joint practices.

Objectives of CPFR
• The objective of CPFR is to optimize the supply chain

• by improving demand forecast accuracy,

• delivering the right product at the right time to the right location,

• reducing inventories across the supply chain,

• avoiding stock outs

• and improving customer service

Benefits of CPFR
• Strengthens partner relationships

• Provides analysis of sales and order forecasts

• Uses point-of-sale data, seasonal activity, promotions, new product

introductions and store openings or closings to improve forecast accuracy

• Manages the demand chain and proactively eliminates problems before they
appear

• Allows collaboration on future requirements and plans

• Uses joint planning and promotions management

• Integrates planning, forecasting and logistics activities

• Provides efficient category management and understanding of consumer

purchasing patterns

• Provides analysis of key performance metrics (e.g., forecast accuracy, forecast

exceptions, product lead times) to reduce supply chain inefficiencies, improve
customer service and increase revenues and profitability

VICS’s CPFR Model

The current CPFR model, first introduced by VICS in 2004, involves an iterative
cycle
of four key activities (see Figure 5.5) where full implementation of every element is
not
necessary to achieve value. According to VICS, the manufacturer and retailer
participate
in four collaborative activities to improve performance.

• Strategy & Planning:

 Establish the ground rules for the collaborative relationship. Determine
product mix and placement, and develop event plans for the period.

2. Demand & Supply Management:

Forecast the consumer (point-of-sale) demand for the retailer, as well as order and
shipment requirements for the manufacturer over the planning horizon.
3. Execution
Place orders, prepare and deliver shipments, receive and stock products on retail
shelves, record sales transactions and make payments

4. Analysis:
Monitor planning and execution activities for exception conditions,
aggregate the results and calculate key performance metrics. Share insights and
adjust plans for continuously improved results.
Collaboration tasks in the current VICS CPFR model
In the current VICS CPFR model, the customer is at the center of the collaboration.
There are now eight collaboration tasks as follows:
• Task 1: Collaboration Arrangement
• Task 2: Joint Business Plan
• Task 3: Sales Forecasting
• Task 4: Order Planning/Forecasting
• Task 5: Order Generation
• Task 6: Order Fulfillment
• Task 7: Exception Management
• Task 8: Performance Assessmen

CPFR Software
• A CPFR software solution typically includes a forecasting module and other
modules for planning procurement, supply and replenishment among other
uses.

• Examples of two leading suppliers of CPFR solutions are provided below:

1. JDA Software Group, Inc. (www.jda.com/)

2. Oracle (www.oracle.com/index.html)
JDA Software Group, Inc.
• i2 Demand Manager: Monitor and adjust demand plans as demand signals across the
supply chain evolve.
• i2 Profiler: Identify common selling patterns to create accurate forecasting profiles
for short life cycle and seasonal fashion products.
.
i2 Demand Collaboration: Resolve demand/supply problems before they adversely
affect the customer by gaining better visibility into customer demand.
• i2 Planning On Demand: Optimize the demand and supply planning process for
fabless semiconductor companies by using this subscription-based solution

Replenishment

Replenishment a trademark of GS1 US, is a concept that aims to enhance supply

chain integration by supporting and assisting joint practices. CPFR seeks cooperative
management of inventory through joint visibility and replenishment of products
throughout the supply chain. Information shared between suppliers and retailers aids
in planning and satisfying customer demands through a supportive system of shared
information. This allows for continuous updating of inventory and upcoming
requirements, making the end-to-end supply chain process more efficient. Efficiency
is created through the decrease expenditures for merchandising, inventory, logistics,
and transportation across all trading partners.

Origins of Replenishment

• CPFR began as a 1995 initiative co-led by Wal-Mart's Vice President of

Supply Chain, Chief Information Officer, Vice President of Application
Development).

• According to an October 21, 1996 Business Week article entitled Clearing the
Cobwebs from the Stockroom, New Internet software may make forecasting a
snap, "Benchmarking developed CFAR with funding from Wal-Mart, IBM,
SAP, and Manugistics.

• The latter two are makers of accounting and supply chain management
software, respectively. To promote CFAR as a standard, Benchmarking has
posted specifications on the Web and briefed more than 250 companies,
including Sears, J.C. Penney, and Gillette. About 20 companies are
implementing CFAR.
 • Warner Lambert (now part of Pfizer) served as the first pilot for CFAR. The
pilot's results were publicly announced at a CFAR industry session at Harvard
University, July 30, 1996 of executives from Wal-Mart's suppliers as well as
other retailers and the Uniform Code Council.

Model of Replenishment

CPFR originally was presented by Voluntary Interindustry Commerce Standards

Committee (VICS) in their VICS Collaborative Planning, Forecasting and
Replenishment(CPFR) Guidelines in 1998 as a 9 step (or data flow) process,[

The 9 steps were:

• Develop Front End Agreement
• Create the Joint Business Plan

• Create the Sales Forecast

• Identify Exceptions for Sales Forecast

• Resolve/Collaborate on Exception Items

• Create Order Forecast

• Identify Exceptions for Order Forecast

• Resolve/Collaborate on Exception Items

• Order Generation

Importance of Forecasting Software Solution

Demand Works offers desktop, server, and cloud options for forecasting. All
solutions include an “expert” automatic time-series forecasting engine that generates
accurate forecasts for thousands of items in minutes.

• Highly accurate, automatic statistical engine.

• Best in class forecasting and sales collaboration technology.

• 100% Browser-based.
• Pivot Forecasting® for seamless forecasting by product, customer, region or any
other dimension.

• Available solutions for inventory planning, optimization, and sales and operations
planning.

• Easily integrated with your ERP.

Some forecasting Software

1. Tap Hunter

Who Uses This Software?

Thousands of busy bar/restaurants owners use Tap Hunter daily to save time and
sell more. Tap Hunter drives traffic through their door while marketing their drink
lists in the places that matter!

Product Details

• Starting Price = $49.00/month

• Pricing Details = Our pricing starts at $49/mo and goes up to $177/mo.

• Deployment = Cloud, SaaS, Web Mobile - Android Native

Mobile - iOS Native

• Training = Documentation
Webinars
Live Online

2. Officewise

Who Uses This Software?

 • Officewise is used by thousands of businesses and other organizations that
need an affordable easy-to-use online system to manage their inventory more
efficiently.

Product Details

• Starting Price = $8.95/month/user

• Pricing Details = $8.95 - 39.95 for up to 5 users and $7.95 for each additional
user

• Free Version = Yes

• Free Trial = Yes

• Deployment = Cloud, SaaS, Web

• Training = Documentation, Webinar, Live Onli

3. talech

Who Uses This Software?

talech is a great fit for multiple business types: Retail and Apparel, Cafes,
Quick Serves and Casual Dining, Full service restaurants and bars, Outdoor Venues,
and Yogurt Shops

Product Details

• Starting Price = $49.00/month

• Pricing Details = Additional devices and premium feature pricing available.

• Deployment = Cloud, SaaS, Web

Mobile - iOS Native
 • Training = Documentation , Webinars, Live Online , In Person

• Support= Online 24/7 (Live Rep)

• Vendor Details= talech ,www.talech.com/

3. Stock&Buy

Who Uses This Software?

• Small to medium sized businesses. Online retail and wholesale businesses

Product Details

• Starting Price =$25.00/month

• Pricing Details =www.stockandbuy.com/pricing

• Free Version =Yes

• Deployment =Cloud, SaaS, Web

• Training Documentation,Webinars,Live Online,In Person

• Support =Online Business Hours 24/7 (Live Rep)

• Vendor Details=Stock&Buy