Letter to the Editor
Staff -- Manufacturing Business Technology, 9/1/2001 12:00:00 AM
I read with great interest your August cover story, "Breathing Life into Forecasting," by Kevin Parker. The article rightly points that forecasting function is still needed for planning, whether demand planning, supply chain management, or CPFR [collaborative forecasting & replenishment]. It should be noted that even in make-to-order environments, forecasting has a role in business and financial planning, if not in production planning.
Also, the article clearly emphasizes the need for good and reliable data from channels, and information-sharing relating to demand. It would be hard to balance good customer service with optimal inventory levels when manufacturing operations need to plan production (in units) and ship products (SKUs) daily, and sales can only provide quarterly dollar forecasts by category.
Although sales forecast from retailers would be useful in demand planning, the quality and reliability of such forecasts need to be continually monitored. Otherwise, a major buildup of inventory and obsolescence would result. The retailers do not provide a guaranteed purchase order, but only an estimate. A company's internal data—such as orders and shipments—along with any available point-of-sale information that represents current customer pull, should be used as sanity checks.
As the article mentions, there are several excellent statistical forecasting engines and software packages on the market. One glaring omission is SAS/ETS and SAS High Performance Forecasting System from SAS Institute, Cary, N.C. Many of these statistical forecasting packages are now Web-enabled, so the Internet or an extranet could be used to get data from the field and relay forecasts back. To put collaboration to its best use and forge a consensus-based demand forecast, I expect software vendors to enable statistical synthesis of different forecasts using appropriate methodology and levels of confidence or risk.
N. Murugesan, Manager of Operations Research, Alberto-Culver USA, Melrose Park, Ill.
