Forecast driven

Christopher (2000) also states that to be truly agile, a supply chain must possess four distinguishing characteristics, being one of them Market sensitive, which means that the supply chain is capable of reading and responding to real demand or being demand-driven. The problem is that most organizations are forecast-driven rather than demand-driven. In other words, because they have little direct feedforward from the marketplace by way of data on actual customer requirements, they are forced to make forecasts based on past sales or shipments, and convert these forecasts into inventory. 

The last case is when a product has low demand variability, and in this case, a data driven statistical forecast should be applied, as it will allow capture the benefits of a push system. The approach described above brings light to help define when a company should be demand driven or forecast driven. Based on Croxton et al. (2002), it is proposed to expand the matrix to also include the tools and approaches that can be used in each one of the three situations, as detailed and illustrated in Fig. 4.4. 

Demand-driven supply chain Zones for forecast-driven and demand-driven rules. Top down 28... 

Forecast-driven Capacity, commonality, consumption driven... 

Regarding market-related factors, product demand volatility specifies to what extent the products is made to order or to stock. Thus, if volatility is high, forecasting is relatively difficult and products are typically made to order. Conversely, low volatility means the items can be forecast driven. 

In the future, organisations must be much more demand-driven than forecast-driven. The means of making this transition will be through the achievement of agility, not just within the company but across the supply chain. Responsiveness also implies that the organisation is close to the customer, hearing the voice of the market and quick to interpret the demand signals it receives. 

We have already made the point that in today s volatile business environment it is much harder to achieve high levels of forecast accuracy for individual items. Whilst managers will always be seeking better forecasts, the fact is that as uncertainty increases it gets harder to run a business on the basis of forecast demand at the stock keeping unit (SKU) level. Instead the focus has to be on how the company can move from a forecast-driven to a demand-driven mentality. Basically what this means is that ways have to be found to make it possible to react to demand within the customer s order cycle. Thus if the customer s expectation is for a five-day lead time from order to delivery, the goal is to be able to respond within that lead time. 

Against this background of uncertainty and increasingly unpredictable demand, WDF is seeking to make the transition from a forecast-driven to a demand-driven... 

Logistics and supply chain management have conventionally been forecast-driven rather than demand-driven. In other words, the focus has been to look ahead over a planning horizon and to predict demand at a point in time and then to build inventory against that forecast. As markets become more volatile and turbulent... 

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