As published in Electronic Business, June 2003

BETTER THAN NOTHING
Why forecast? ["Forecasts can be your friend," May 1, 2003.] Because any plan is often more useful than no plan. Forecasting drives other cross-functional activities. It provides input to manufacturing for their build plan. HR gets visibility for head count utilization and staffing requirements. Marketing and engineering can gauge the success of their products.

Finance monitors performance in relation to the company's goals, and it sets goals and priorities for the sales channel. Forecasting used in conjunction with close communications within the supply chain can reduce cost, by minimizing inventory, maximizing velocity and reducing schedule changes.

Years ago it was typical for a manufacturer to deal directly with the supplier, who would procure and manufacture at one location, or at least another location within their company.

Today that direct buyer/seller relationship would be atypical.

Outsourcing has elongated the supply chain. Contemporary supply chains comprise the manufacturer, customer, sales channel (direct and indirect), distribution and contract manufacturer. Frequently, with major customers, these include multiple locations around the world where the procurement and manufacturing logistics must be coordinated.

So instead of direct communications between manufacturer and customer, we have the scenario played at many parties. Get everybody in a circle and whisper something into the ear of the first person and pass it around until it gets to the last person who repeats what he or she heard. The final message bears scant resemblance to the original whispered message.

Forecasting is just one tool that aids in making informed decisions. It needs to be part of a process that includes clear, frequent and timely communication of agreed-upon metrics throughout the supply chain.

John L. Corbitt
Corbitt Associates
Lilburn, GA
John@CorbittAssociates.com