Tuesday, February 11, 2014
Working Capital Management
Supply chain is the entire flow involved in the delivery of the end product to the customer from the procurement of raw materials to its transformation and finally to the distribution the end products. Management of the activities of supply chain to make the most out of the competitive market is supply chain management. To make the most of the supply chain management it is very important to understand the demand of the product and how it might be in the future.
The biggest hurdle of a business organization is to estimate what, when and how to fulfill the needs of its customers. Forecasting of supply chain management is a panacea for the risk factor that an organization may emanate across in the future. It is the prediction of the future to assist you to make the best possible choice in any decision you make. Forecast can be based purely on the past experience, individual judgment or based on data and mathematical formulas. However, forecast is uncertain and only a possibility of the future.
For a business organization, forecast of product demand can be very important for planning decision. Accurate forecast will enable an organization to decide on crucial supply chain activities such as the quantity of raw materials needed, the mode of transportation needed, how and where to distribute the products.
In supply chain management, it is essential for a firm to plan ahead for the materials that they are going to use for the production which helps in managing the flow of the inventory within the firm and ultimately contribution increasing the productivity of the organization. The firm needs to forecast and understand the kind of materials and the quantity needed and when to place the order. This will ensure that the right materials of the right quantity and quality at the right time are available for manufacturing purposes. Forecasting stipulates cost management, time management and labor management whereby the firm can efficiently and effectively manage and ensure that there is enough to supply in order to meet the demand from the customers. In order to meet the demand of the customer at a particular region at a particular time, we do contingency planning as one needs to be prepared for any risk management. Mostly it is important to plan out the worst case scenarios as to what worst thing can ever happen or what can be done about it? Negotiating with the supplier/vendor and market analysis are another important factors in forecasting as it helps maintain the inventory of the raw materials which keeps the business going.
Forecasting will immensely contribute in the creation of effective and efficient chain management system and ultimately contribute in the productive of the company for sustainable competition.
The Importance Of Forecasting In Supply Chain Management By Mike Sachoff
Article Date: October 21, 2008