Forecasting Tips that Reduce Supply Chain Uncertainty

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The distribution industry’s supply chain is squeezed between manufacturers and their customers, facing increased competitive threats, escalating SKU counts, and expanding e-commerce.  Today, distributors are navigating increasingly unpredictable supplier lead times and availability. 

While staffing shortages and demand spikes increased pressures on distributors, the widespread supply chain problems create an opportunity for companies to outperform their peers. 

Smart planning alleviates the risk of distribution supply chain uncertainty 

Better planning helps distributors maintain service levels amid supply constraints, enabling them to mitigate the risk of future supply disruptions.  Here are some strategies planners can use now to get ahead in the new normal. 

Accurate forecasting of uncertain demand 

The first step to optimizing service levels amid supply chain uncertainty is to understand demand better.  Modern demand forecasting platforms, like Vanguard Predictive Planning™, look at the specific factors driving demand at a granular level.  Probabilistic planning then produces a range of possible outcomes with probabilities assigned to every value within the range using advanced algorithms to analyze multiple demand variables.  This planning goes beyond the demand forecast number to the likelihood of demand in any given period. 

The next step is to use short-term forecasting and demand sensing to look into current behaviors and trends.  AI-enabled forecasts identify demand triggers to track and assist planners in determining when to decrease or increase demand volumes.  With modern planning solutions, planners follow the correlation with external factors for a sharper picture of shifts in demand. 

Right-sizing inventory 

Being able to avoid inventory overages and shortages begins with a better forecast and requires a smarter inventory strategy.  Safety stock helps to hedge against uncertainty.  Planners can run what-if scenarios to assess the impact of changes in supply parameters (e.g., extended lead times, changes in supplier constraints, and ordering frequencies) on stock targets.  Scenario planning provides visibility into inventory costs associated with different service level targets, e.g., show the cost of additional inventory required to increase service levels from 96% to 98% for a specific product. 

Better visibility of supply requirements 

Smarter supply chain planning allows planners to work with suppliers to acquire scarce inbound materials quickly.  Visibility to supply requirements over a longer horizon allows for long-range planning alongside shorter-term decisions, making plans more reliable.  Having a modern planning solution in combination with the current plan provides visibility on future stock projection and can be combined with a supplier calendar for even more visibility. 

Are you interested in learning more about Vanguard Predictive Planning™?  Request a demo today.