Best Practices for Demand Forecasting & Inventory Planning 2023
The challenges associated with persistent supply chain disruptions need to be addressed proactively. Companies must strive to improve their demand forecasting and inventory planning processes by leveraging the latest technology and best practices to manage supplier unpredictability.
The webinar “Best Practices for Demand Forecasting & Inventory Planning 2023” held by Keith Drake, Ph.D., along with Malcolm O’Brien, CSCP presented industry best practices to deal with supply chain disruptions. Also, it unleashed approaches to indicate possible problems and react to unexpected events faster. The webinar includes practical demonstrations on how to implement these approaches using the Streamline platform.
According to the World Economic Reports, senior executives in operations and supply chain management expect the impact disruption on corporate value to increase by up to 25% over the next few years and only 12% of companies are adequately protected against future disruptions in supply chain and operations. And according to Gartner Reports 23% of supply chain leaders expect to have a digital supply chain ecosystem by 2025.
“Many of us are aware of this issue, but we are not prepared to proact. Some of our best practices can hopefully shift your focus from reacting to being proactive. As you know supply chain unpredictability is a new normal, for sure. It has been for at least a couple of years and it will be for the foreseeable future,” – said Keith Drake, Ph.D. “Our jobs and our responsibilities are very challenging. I know many executives who are interested in our platform start the conversation with ‘we are transmitting to a digital stack for all of our supply chain planning management’. So it’s good to see that shift in focus but I think, across the industry, it is still ongoing.”
Common supply chain planning challenges
So, according to our industry research, the common supply chain planning challenges are as follows:
All three topics represented during the webinar cover the management of uncertainty in supply chain operations, with a focus on optimizing risk reduction strategies for demand forecasting and inventory planning.
Supplier unpredictability can cause major disruptions in supply chain operations. Common examples of supplier unpredictability include changes in delivery date and order quantity. When a supplier changes the delivery date, it can cause delays in manufacturing schedules and impact product availability.
Supplier unpredictability: Tactical Best Practice (reactive)
To maintain a single source of truth, a tactical best practice is to update the order status in the ERP system, which will then trigger automatic updates to other planning platforms. Streamline and other planning solutions offer flexibility to make changes to parameters such as supplier lead time, shipment quantities, and variance.
Supplier unpredictability: Strategic Best Practice
As a strategic best practice, businesses can mitigate supplier unpredictability by synchronizing orders of all items with each supplier and fostering clear communication regarding supply and ordering requirements. One effective implementation strategy for achieving this goal is to transition from a Min/Max (replenishment point) ordering strategy to a Periodic ordering strategy, which can reduce uncertainty and optimize inventory management.
“Adaptability and measurability are key here. You need to recognize the change in the market, create a model you think represents the new market right, and measure its performance going forward. Digitalization enables all of that, automation is to save you time and energy,” – says Malcolm O’Brien.
Historical data disruptions
Disruptions in historical data can be caused by various factors, including inflation and high-interest rates, geopolitical events, global trade conflicts, stockouts during unanticipated demand surges, and supplier unpredictability.
To cope with disruptions in historical data in supply chain management, best practices include revising demand forecasting strategies to account for the impact of such disruptions. It is important to avoid changing source data in ERP systems or other databases, as this data serves as the single source of truth and should remain unchanged.
New product demand forecasting
When faced with challenges in forecasting demand for new products, businesses can adopt best practices that include modeling demand based on patterns or models from similar items with representative sales history. These models can be based on individual planning items such as SKU/location/channel combinations and product categories, providing a more accurate representation of demand patterns.
The Bottom Line
“Everybody experiences data disruptions but they are all different. So you need to focus on what makes sense for you in the context of an automated process that allows you to apply a strategy. The next step is launching a plan to quickly respond to supplier unpredictability. We suggested one methodology, switching from a replenishment point, min-max to a periodic strategy,” – said Keith Drake, Ph.D. “Many areas of the Streamline platform can be tailored to meet your business model and industry conditions. We suggest thinking about what works best for you, how you can make yourself more predictable, and how Streamline can add value to your business.”
Too much manual work in Excel?
See what Streamline can do for you
- 99+% inventory availability.
- Up to 99% forecast accuracy.
- Up to 98% reduction in stockouts.
- Up to 50% reduction in excess inventory.
- 1-5 percentage points margin improvement.
- Up to 56X ROI in one year. 100% ROI in the first 3 months.
- Up to 90% reduction in time spent on forecasting, planning, and ordering.