Demand Forecasting Based on Operational Diagnosis and its Contribution to Management

Demand forecasting has been used as a trigger for supply chain management (SCM), including inventory management, production, procurement, and logistics. In recent years, the importance of demand forecasting in relation to sales and operations planning (S&OP) has begun to be recognized again in Japan. However, most of the studies for its sophistication don't seem to be used in a correct manner.

The previous white paper introduced the significance and outline of the diagnostic framework for demand forecasting operations developed by the authors.

In addition to this, this paper examines how advanced demand forecasting can create value in S&OP, relying on overseas research findings.

The elements that are important in the advancement of demand forecasting and the conditions for designing and implementing them have been organized, but it is difficult to promote all of them simultaneously in actual business. By utilizing the framework described in this paper, companies are able to receive effective hints on what specific state they should aim for and how they should proceed with upgrading.

It has been pointed out that organizational climate is important to improve the accuracy of demand forecasting, which is the foundation of S&OP. Specifically, the management's interest in demand forecasting, hiring, training and development of planners, career paths, metrics for evaluating forecast accuracy, and forecasting tools—all support the design of advanced processes, the introduction of support systems, and the improvement of planners' skills. The diagnostic framework designed by the authors of this paper is effective in promoting such advanced demand forecasting in a rational and efficient manner.