Most importers today have complex supply chains with suppliers spread worldwide to either source raw materials or procure semi-finished products. But poor supply chain issues probably impede your ability to accurately forecast demand. This inability to accurately forecast demand affects production and sales allocation. It also poses the risk of excess inventory or inefficiencies creeping into your production process.
While disruption is a constant in international trade, the present scenario has worsened the situation. Hence, it becomes critical for importers to lean on technology to enable demand forecasting with some level of accuracy. This makes demand planning simpler and more effective, which in turn improves production planning.
Reasons for poor forecasts
One of the biggest challenges in demand planning is lack of end-to-end supply chain visibility. Couple that with functional divisions operating in silos, poor communication between stakeholders along the supply chain, sub-optimal production planning and materials planning, and you are looking at faulty forecasts.
To predict demand accurately, an importer needs to have visibility at least down to the last SKU level or item. For instance, while retailers rely on point of sales’ data to predict demand, others such as chemicals, toys or industrial manufacturing-related companies are driven by seasonality/past PO orders. The supply demand mismatch occurs when importers don’t have visibility on aspects such as arrival time of deliveries or the quality of materials in transit.
How to improve forecast accuracy
Well-planned demand-supply chain management enables increased forecasting accuracy, thus paving the way for systemic and well-organised production. Technology can be your lynchpin to build forecast accuracy. Reports published by Gartner highlight the benefits of having sound demand forecasting which lead to:
- 15% less inventory
- 17% increased order fulfilment
- 35% lower cash-to-cash cycles
- 60% more profit margins
Having the right logistics partner such as Maersk can help you realise cost benefits through improved demand forecasting, inventory reduction and automation of basic processes. Most importantly, you can get the end-to-end visibility you need. Here’s how Maersk’s Destination Supply Chain Management (DSCM) solution can enable importers like yourself make more accurate forecasts:
Providing end-to-end visibility
Your ability to make critical decisions depends on your understanding of what is happening at every single point of your supply chain. Decisions pertaining to the quantity of your product, timing of your shipment and its routing, availability of safety stocks across different distribution centers, etc. needs to be taken swiftly and accurately.
Maersk’s DSCM solutions offers you such extended visibility into each component of your supply chain. Take control of decisions related to the quantity of your product, the timing of your shipment and the routing, all with the expert support of Maersk’s supply chain specialists.
Enabling better demand sensing: An imperative to avoid forecast errors, demand sensing will help you effectively use your inventory. DSCM can help you in forecast creation, inventory target setting and order planning. All the key aspects of demand sensing that will help you towards better forecasts.
Facilitating inventory optimisation: Your ability to keep costs in check also depends on better inventory management. By integrating with your enterprise-wide SAP the Maersk DSCM solution allows you to reduce forecasting error caused by inaccurate demand sensing. This in turn allows you to reduce the maintenance of safety stock inventory levels and replenish stock only when needed.
Reducing cost: Natural calamities could foil an importer’s plan when cargo is unexpectedly stuck en route at some port. Ignoring such visible signs may mean added D&D expenses and freight costs. Besides those costs, such unanticipated scenarios can also choke the supply chain and disrupt future production and sales planning. Here’s where DSCM can help you plan better by tracking the cargo from point of origin to delivery.
Ensure regular communication with all stakeholders: Knowing if your supplier is on track with delivery, if the proper documents are ready for taking receipt of delivery, changing macro scenarios given the ongoing crisis and many other variables need to be clearly communicated across the supply chain. Such communication breaks the silos, closes any lags in communications and ensures that all stakeholders have a clear line of view into demand and supply making forecasts more meaningful and accurate.