Fully synchronized supply chain forecasting

Abstract

This chapter shows how the forecasting and the planning functions in a supply chain can be organized so they will yield optimal forecasts for an entire supply chain. We achieve this result by replacing the process of generating forecasts with that of making optimal coordinated supply chain decisions. The ideal performance for a supply chain is to have the flows of materials perfectly synchronized with the demand rate for the finished product that the chain produces. When the equality is achieved, we have a pure “demand pull” supply chain. This ideal is difficult to achieve because forecasting and decision making in supply chains are typically decentralized and forecasting and planning uncoordinated. Creating a competitive advantage for the finished product requires achieving the ideal. The opposite, not achieving the ideal, leads to uncoordinated forecasts and decisions that trigger unintended buildup of inventories, lost sales and the bullwhip effects, slowness and high costs.

This chapter shows how (1) we can achieve the ideal synchronous supply chain flows by using temporal linear programs; (2) then, we guide each individual supply chain member company in developing his optimal operations plan to guide him in executing his part in the supply chain plan. The result from the two factors: the entire supply chain will achieve the ideal flow rates.

Citation

Waage, F. (2008), "Fully synchronized supply chain forecasting", Lawrence, K.D. and Geurts, M.D. (Ed.) Advances in Business and Management Forecasting (Advances in Business and Management Forecasting, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 211-224. https://doi.org/10.1016/S1477-4070(07)00212-7