SUPPLY CHAIN

MANAGEMENT
UNIT-4
PLANNING DEMAND,INVENTORY AND
SUPPLY
BY:
PABITHA

VAISHNAVI
OVERVIEW OF DEMAND FORECASTING IN
SUPPLY CHAIN
MEANING :
Demand forecasting is the process used by businesses to predict future demand
for a product or service. With improved demand forecasting, businesses can estimate
future demand more effectively. In order to ensure that the rights products are
available at the right time and place.

The methods of demand forecasting in supply chains:

 Demand forecasting methods can be broken down into two basic
categories: quantitative and qualitative. Quantitative forecasting relies on historical
data about customer demand, supply chain performance, seasonal demand, and other
data-driven metrics. Qualitative forecasting methods are less tethered to past trends

Three Main Roles Of Forecasting :

Accurate forecasting helps cut operational costs, increase customer satisfaction,
and enhance inventory planning.
save time and money
Improve accuracy
Help enterprises react to data in real time
Demand Forecasting Techniques :
Time Series Analysis: Time series analysis looks at past data, like previous
sales, to spot patterns that repeat over time.
 Moving Averages: A simple techniques that average past data points over a
defined period.
 Exponential Smoothing: weights more recent data points more heavily to
adjust for recent trends.
 Regression Analysis: Examines relationship between variables (eg., pricing ,
promotion )and their impact on demand.
 Delphi Method: A process framework based on the results of multiple rounds
of questionnaires sent to a panel of experts.
 Simulation Models: uses a computer model to study the behavior of a supply
chain over time . A supply chain shows the behavior of a logistics network over
time.
 Machine learning :Advanced algorithms analyze large datasets,
detecting ,detecting patters, and making accurate predictions.
Concepts Of Demand In Supply Chain.
Demand planning is a supply chain management process of forecasting, or
predicting, the demand for products to ensure they can be delivered and satisfy
customers.
The goal is to strike a balance between having sufficient inventory levels to
meet customer needs without having a surplus.
Demand forecasting is a means of estimating what customer demand will look
like in the future, and how it will affect your business' supply chain.
It's essential for business health, continuity, and growth, ensuring you make the
right decisions at the right times.
Demand forecasting is a key process in supply chain management that helps
businesses predict customer demand for products and materials.
The five-five steps of forecasting :
 Step 1: Problem definition.
 Step 2: Gathering information.
 Step 3: Preliminary exploratory analysis.
 Step 4: Choosing and fitting models.
 Step 5: Using and evaluating a forecasting model.
BENEFITS OF DEMAND FORECASTING:
Demand forecasting is a process businesses utilize to predict
customer demand over a period, and aids in making informed decisions
about supply chain operations, inventory stocking, capacity planning,
cash flow, and profit margins.
 Demand forecasting provides benefits such as increased supply chain
efficiency, efficient budgeting and improved cash flow management
which can help a business minimize costs and maximise profits.
 To improve demand forecasting, businesses should focus on accurate data
analytics, measure data accuracy by comparing forecasts with actual
demand and effectively manage any surges in demand.
CHALLENGES OF DEMAND FORECASTING
:
Demand variability : unpredictable fluctuations in demand due to market condition or
external factors.
Data quality : In accurate or incomplete data can lead to poor forecasts .
Supply chain disruptions : Factors like geopolitical events, natural disasters or
demand forecasts.
Lead time: Long supply chain lead times may require forecasts that stretch into
uncertain future periods
Seasonality : Can make forecasting more difficult, as historical data may not represent
future patterns. Market Competition When there is fierce competition .
Demand volatility and demand forecasting challenges. As global
supply and demand have been affected, some businesses saw
dramatic rises in demand;
AGGREGATE PLANNING IN THE SUPPLY
CHAIN
 Aggregate planning is a method for developing an overall manufacturing
plan that ensures uninterrupted production at a facility. It process of
developing ,analyzing and maintaining preliminary approximate schedule
of the overall operations of a organization.
 Aggregate planning, a fundamental decision model in
supply chain management, refers to the determination of
production, inventory, capacity and labor usage levels in
the medium term.
 The term aggregate implies that the planning is done for a
single overall measure of output or, at the most, a few
aggregated product categories. The aim of aggregate
planning is to set overall output levels in the near to
medium future in the face of fluctuating or uncertain
demands.
 The goal is to balance supply and demand while minimizing costs over a
medium term horizon, typically 3 to 18 months.(covers a periods).
ROLE OF AGGRAGATE PLANNING IN A SUPPLY
CHAIN :
Specify operational parameters over the time horizon :
production rate
work force
overtime
machine capacity level
Sub contracting
inventory on hand
All supply chain management stages should work together
On an aggregate plans that optimize supply chain
performance.
Advantages of Aggregate Planning
 The advantages of utilizing aggregate planning include the following:
 Minimize Staffing Fluctuations - Through utilizing aggregate planning to forecast
production demand, businesses are able to predict staffing requirements. Businesses
that are in need of additional employees on a temporary basis tend to fill these
positions with workers from temporary employment agencies. With proper
forecasting, a business will be able to reduce or eliminate the need to hire extra
workers.
 Reduce Overhead - Within a manufacturing facility, having excess inventory can
cost a lot of money. This is because the facility must ensure that it has enough
material on hand to produce the finished goods as well as the space to store those
items. In addition, having finished products laying around increases the likelihood
that they will become damaged or become obsolete before they are sold. Adhering
to an aggregate planning model can help production facilities keep lower levels of
inventory and reduce overhead costs.
 Accommodate Changes - Most production companies cannot stick to a single plan
at all times as production orders can change often. Aggregate planning allows for
contingency plans to be put in place in order for production facilities to be able to
accommodate for significant changes in customer orders and production. Updating
forecasts and production plans periodically allows planners to take into account any
changes in expected demand or supply and revise plans.
Objectives of Aggregate planning
- Decrease expenditures in different inventories

- Increase the usage of devices and equipments

- Decrease the variations in production rate

- Provide good customer service

- Decrease the workforce level variations

- Decrease the cost of planning outline

MANAGING PREDICTABLE VARIABILITY :