Some wisecrack once remarked that ‘accurate forecasting’ is an oxymoron. Edgar R. Fielder echoed this sentiment in his classic ‘The Three Rs of Economic Forecasting’ when he proclaimed that ‘he who lives by the crystal ball soon learns to eat ground glass.’
By Laura Goring, Program Manager, Chemigraphic
Yet the introduction of Enterprise Resource Planning (ERP) systems that can crunch data for breakfast and unify supply chain, sales, promotional and seasonal information are set to add precision, agility, simplicity and intelligence to electronic manufacturing forecasting. And that’s great news.
The World Economic Forum reports that companies which improve their forecasting can:
- Cut as much as 30% out of inventory
- Increase the average fill rate by up to 7%
- And improve margins by 2%
Nowhere is this of more immediate interest than in electronic manufacturing. According to research by IBM, today’s electronic industry operates at an average gross value of inventory as a percentage of revenue that is as high as 9.58%.
There are, of course, a number of ways to tackle the high levels of inventory within the industry, but one stands head and shoulders above the rest. Strong forecasting capability is the cornerstone to healthy inventory levels and improved margins.
The Holy Grail of Accurate Forecasting
Having a 100% accurate forecast is the Holy Grail for electronic manufacturing.
To know that your supply chain and manufacturing partners can make exactly what your customers want – and when they want them – is the equivalent of operational nirvana.
The effect on OEMs’ operational costs and ultimate profit would be dramatic:
- No waste
- Reduced cost
- Improved margins
- Increased efficiency
- Increased sales
- Better customer satisfaction
But finding any Holy Grail always proves elusive – just ask Indiana Jones!
The influences that affect forecasting accuracy are numerous and complex – and the globalized supply chain of electronic manufacturing makes collating, unifying and crunching all the data sources a seemingly onerous task.
While workarounds to plug gaps arising from forecast inaccuracy include holding stock or introducing techniques like DDMRP (Demand Driven Material Resource Planning) to hold strategic buffers, these fail to confront the issues of accurate forecasting head on.
How Can You Forecast More Accurately?
OEMs today need an agile and efficient supply chain and manufacturing partner. It’s the only way to compete in a challenging environment where costs can rise faster than revenues, SKUs have a habit of suddenly proliferating and customers often switch brands in response to promotions or changing trends.
The global manufacturing base makes it increasingly hard to respond swiftly and efficiently to surge demand. Meanwhile, the growth of online retail simply adds to demand volatility. With so many outlets, so much dynamic pricing, multiplying fulfillment locations, and real-time discounting, the complications for accurate forecasting stack up.
Chemigraphic’s recent introduction of a fully cloud-based ERP system has strengthened our ability to partner with you for accurate, efficient forecasting.
IFS Applications 10 is a best-in-class ERP – and we are one of the one of the first UK businesses to have had this version of IFS implemented from scratch.
IFS/Demand Planning reduces the complexity of forecasting through one of the most sophisticated and easy-to-use graphical demand planning tools on the market today. Its highly interactive forecasting environment allows us to work with you to quickly create and adjust demand forecasts for input into other key enterprise activities such as sales planning, inventory control and production.
Commenting on the benefits of the new ERP Stewart Gadd, Technical Director at Chemigraphic, said that ‘our new and enhanced system has improved our operational efficiency by bringing everything together into one core platform. The benefits are clear for our customers: it enables superior planning, better forecasting and enhanced capacity management, allowing us to do what we do better, faster and more flexibly.’
To ensure that we can forecast requirements from the start, and agilely respond to changes as they happen, we have also introduced my own new role as program manager, giving me the responsibility of liaising with customers so we can better understand their requirements, potential barriers to progress and expectations early on in our relationship and at fundamental milestones along the way.
This allows us to create an improved, clear forecast for each customer and each project, in order to manage capacity and activity peaks as far ahead as possible.
It’s essential to establish forecasting that allows for proactive capacity planning: meaning that inventory holding is reduced, manufacturing is delivered on time, supply chain efficiency is increased and lower costs deliver greater margins.
Today’s sophisticated technology and processes now mean that forecasting can be intelligent, reactive and proactive. Using this added insight, trends and known triggers that cause peaks or drops in activity can be layered on top of delivery schedules and seasonal data to give a clearer overall picture of what is ahead.
And, just as importantly, we can quickly respond should the unexpected occur.
The benefits for customers are:
- Complete transparency and real-time visibility of the schedule.
- Enhanced ability to quantify demand and manage supply.
- A collaborative planning partner who works with you on forecasting to ensure shared communication and data.