How ERP can help prevent demand forecasting headaches

Forecasting demand is an ongoing challenge for supply chain managers everywhere. Customers often have a fuzzy idea of what they will want in the future (if they have any idea at all). Many businesses also have short product cycle times. There are many reasons why forecasting headaches can occur.

ERP is here to help

Every past order should be stored in your ERP. All the data, including customer name, SKU ordered, order date, requested delivery date, actual delivery date, and more are inside waiting for analysis. Have you ever run a query on your ERP order data sets and worked up a time series with them? There are plenty of mathematical models for demand forecasting to choose from and chances are your supply chain and order data will fit one of them with a reasonable degree of accuracy.

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You can use models that come bundled within manufacturing ERP or expand the functionality of your system with bolt-on accessories. Demand forecasting models are also available from third-party sellers and although these might be the most sophisticated options available to you, they can often be the most costly.

A wealth of demand data sources

Another ERP tool that can help with demand forecasting is your CRM module. Ask your customers directly which products and volume they expect to order. With a good relationship, they are often willing to share their own forecasting data (be sure to inform them that no contractual agreement exists to purchase at the level their forecast indicates). Set your CRM to poll customers at frequent intervals and track their replies. Check the replies as statistical time series of data just like your actual shipments.

Your marketing plan can also contribute to your forecasts. They will know if a special promotion is planned and should feed this data into your sales ERP module. Marketing will also be conscious of external factors that can affect a demand forecast. When a judgment call is needed, your marketing team should be able to contribute.

Your ERP can create a carefully developed forecast with component demands that can be used to inform your supply chain.

Look at your SKU forecast and place items into product families. Use this technique with the above suggestions and you might find that, although a forecast for a specific item is difficult, a family forecast is attainable and valuable. A family should have many similar components that come from your supply chain. Identify the remaining components and you might find that some of these are low cost meaning you can store a large quantity at little cost.

Your ERP can create a carefully developed forecast with component demands that can be used to inform your supply chain. Share your forecast with suppliers to help them better serve your needs. Forecasting depends on cross-functional trust as well as cross-organizational trust and that includes customers, suppliers, distributors, and transportation providers. When all the players work together the results can be wonderful.

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Tom Miller

About the author…

Tom completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve. He lives near San Francisco Bay in California and can be found on the water in his kayak or on the road riding his motorcycle. Contact Tom at customerteam@erpfocus.com.

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Tom Miller