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Supply Chain Management: Demand Forecast

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Question:

Discuss about the Supply Chain Management for Demand Forecast.

 

Answer:

Forecasting:

Forecasting can be defined as the method that has been used by the businesses in order to make future assumptions about something after analysing some data or pattern. Forecasting in supply chain management is very essential because the company has to make many decisions as per the forecast. The major importance of forecasting in supply chain is that it allows the management to reduce the inventory. For example, if the products are made according to the forecasted demand then the company needs not to spend much on keeping the stocks and thus the cost of stocking or inventory can be reduced (Arndt, 2004). Other importance of forecasting lies in enhancing customers satisfaction by delivering the products as per the demands, improving the marketing and promotion as per the availability of the products etc.
  1. There are three types of forecasting in supply chain:
  • Demand forecast: It is the type of forecast that helps in predicting the demand of the market as per the analysis of the market situations.
  • Price forecast: It is the type of forecast that deals with prediction of the price of the products as per the pricing of the competitors and the demand of the products.
  • Supply forecast: supply forecast deals with the prediction of supplier’s capabilities to supply the raw material (Bowersox, Closs and Cooper, 2002).
  1. There are different loop holes that need to be analysed at the time of forecasting the demand, supply or the price of the products. This is because these loop holes may affect the results of forecasting. It is required by the company or the supply chain department to look for the factors that can affect the forecasting process. Reviewing the forecast is the necessary step to be conducted (Mentzer, 2001). Another technique that can improve the forecasting process of capability of the company is better and efficient data collection methods are the market analysis method because it is the most basic requirement for forecasting. 
  1. 3PL:
  2. 3PL is the service that deals with outsourcing of the logistics functions such as warehousing, transportation etc. it is called 3PL because third party is involved in logistics.
  3. There is various information that needs to seek from the 3PL firm. The first one is scalability of the service. It is required to check the capability of the service to scale up and down their services at the time of peak and lean business. Other than this, the company also needs to take the information about the technology and the financial stability of the company (Lambert, Cooper and Pagh, 1998).
  1. Humanitarian logistics:
  2. It is the branch of logistics that deals with serving the businesses at the time of any natural calamities or emergencies.
  3. The 6 key players are:

Government: The government is responsible for developing the policies as they have the authority to mobilize the resources (Christopher, 2016).

Military: it is required to include military in this list because the soldiers are the one who are called upon first at the time of any calamity for helping the people.

Aid agencies: These are the global actor that is supported by the government to provide the services at the time of calamity (Ballou, 2007).

Donors: they are the one who provides funds for the programs.

NGO’s: they act as the helpers at the tie of capability.

Private organization: thy have more then on role that is they can act as donors, as helpers, as providers etc.

  1. Five (5) ways that Information Technology (IT) is being used to improve supply chain and logistics efficiency and effectiveness.

Reducing cost: implementing technological logistics helps in reducing the cost of the activities by eliminating some of the steps that are required to be done without the use of software (Cooper, Lambert and Pagh, 1997).

Accuracy in forecasting: if the software for data analysis is used then the forecasting can be more efficient and accurate.

Analytics: It is the very easy to record the data and makes standardization in the processes.

Compliance: the company can easily perform as per the government requirements with automated system.

Competitive advantage: using technology in the supply chain and logistics also helps the company to attain competitive advantage over the competitors (Simchi-Levi, Simchi-Levi and Kaminsky,1999). 

Section 2:

  1. Using the case study as a basis for your answer, describe four (4) activities that IKEA is using to ensure its supply chain is sustainable and describe the ways that IKEA is influencing all elements of its supply chain to adopt sustainable practices.

Activities:

  1. The company works closely with the primary sector suppliers so that they can ensure that the suppliers are using sustainable practices. During the working, the supply chain and logistics manager of the company looks for the practices that the suppliers are using so that they can assess whether the suppliers is harming the environment and to which extent.
  2. The company when deals with any of the suppliers try to negotiate with the prices and also assess the environmental impacts of their practices.
  3. Usage of “e-Wheel” to analyse the impact of product on the environment. It is tool that is used by the company to check the impact of the products on the environment so that the corrective actions can be taken if the impact is highly negative.
  4. Reduction of waster by ensuring that suppliers are using the waste in producing other products. The IWAY is the code of conduct that has been used by the company in order to make use of the waste products.

IKEA is the company that tries to influence all the suppliers and the stakeholders to be sustainable so that the company can practice sustainable activities. Communication is the strength of the company. By communicating effectively with the manufacturers and suppliers, the company’s management tries to supports the suppliers and manufactures to practices sustainable practices and also supports them to reduce waste products by recycling the products. IKEA is the organization that is very much successful is marinating the sustainability in its supply chain practices.

 

Discuss the effect that IKEA’s sustainable sourcing and supply practices are having and are likely to have upon the entire furniture industry now and into the future.

As discussed in the case that IKEA is using many practices that are sustainable in nature in order to be sustainable and to ensure that their business activities least harm the environment. The collaboration of IKEA with the organization such as WWF and UNICEF is the evidence that the company’s practices have also having effect on the other companies as well. As far as IKEA UK is considered, the company is already recycling 70% of the waste and now the company is trying to make it 90%. Initiative by one company affects a lot on the whole industry. All over furniture industry that includes suppliers is having appositive impact of these practices. As the company like IKEA has a process to select the suppliers when the suppliers are trying to maintain sustainability in the environment from their practices so that they can work with IKEA. Even the customers have more trust on these companies who works in favour of environment.

As far as the future consideration area considered, it has been analysed that the other companies in this industry will also look for some of the sustainable practices so as to reduce the prices likes IKEA is doing because they have to compete with the practices of IKEA which is becoming the competitive advantage for the firm.

Section 3:

There are many practices that the company is using to involve customers in supply chain. It has been analysed that the first practice is regarding combining the retail and warehousing. The customers can select the products from the warehouse directly and thus they also play their part in supply chain. It reduces the fort of the company to bring the products to the retail shop and also allow the customers to have variety in the products. Another practice is cost per touch; it is believed by the company that if more and more hands touch the products, it raises its cots. Thus, the company tries to involve customers to retrieve the products themselves. This reduces the hands that touch the products and thus the cost reduces and the company can even offer the products at low prices. It is the approach that helps the company to deliver better services to the customers. it has been analysed from the case that IKEA is using various types of strategies so as to be sustainable at the same time serving the customers with ease. Involving the customers in the supply chain helps the company to develop the sense of belongingness amongst the customers. the practices that has been disused above are two of the best practices that the company is using to involve the customers in supply chain because this reduces the company efforts and increases the customers engagement the company.

IKEA believes in maintaining great relationship with their suppliers and the manufacturers. It is very important for the company to do so as they depend on the products sold by the suppliers. IKEA has linked the inventory management system and the logistic managements system very closely so that they can maintain their inventory in order to provide better services to the customers. It has been analysed that The Company owns the proprietary system through which the logistic managers can get to know about the sale through point of sale and about the inventory that comes into store through direct shipping and through distributors. Analysis of this data helps the manager to forecast the sales and the requirement of the products at the store for some days. This helps in delivering the products to the customers on time and also to provide variety of products at the store to the customers. In any of the confusion, the logistic managers himself move to the pallet and bin to check the inventory or the products availability. Along with the above practices, the in store logistic manager of the company use the process called inventory replenishment management process so as to maintain the balance of orders and reorders. The company has the process that is followed such as stocking only at the night after opening hours and regular monitoring of the sticks helps the company to fulfil the regular consumer demands and thus the satisfaction of the consumer from the services of the company increases.

 

References:

Arndt, H., 2004. Supply Chain Management. Gabler Verlag Springer Fachmedien Wiesbaden GmbH, Wiesbaden.

Ballou, R.H., 2007. Business logistics/supply chain management: planning, organizing, and controlling the supply chain. Pearson Education India.

Bowersox, D.J., Closs, D.J. and Cooper, M.B., 2002. Supply chain logistics management (Vol. 2). New York, NY: McGraw-Hill.

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

Cooper, M.C., Lambert, D.M. and Pagh, J.D., 1997. Supply chain management: more than a new name for logistics. The international journal of logistics management, 8(1), pp.1-14.

Lambert, D.M., Cooper, M.C. and Pagh, J.D., 1998. Supply chain management: implementation issues and research opportunities. The international journal of logistics management, 9(2), pp.1-20.

Mentzer, J.T., DeWitt, W., Keebler, J.S., Min, S., Nix, N.W., Smith, C.D. and Zacharia, Z.G., 2001. Defining supply chain management. Journal of Business logistics, 22(2), pp.1-25.

Simchi-Levi, D., Simchi-Levi, E. and Kaminsky, P., 1999. Designing and managing the supply chain: Concepts, strategies, and cases. New York: McGraw-Hill.

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