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The Importance of Demand Forecasting in Global Sourcing

Posted by Tue, Jun, 07, 2011 @ 09:06 AM

Written by Rich Minio, Director of Packaging & Global Sourcing-TopSource

When sourcing globally we, as sourcing professionals, focus thedescribe the image majority of our time on identifying the “right” supplier partner.  We tend to think that once that supplier has been identified the hard work is over.  However, once a supplier has been selected, the true challenge is to successfully integrate their workflows into our supply chain. 

As it currently stands, once a supplier is selected and orders are placed, any issue with getting our product to the market is seen as the supplier's fault.  THEY didn’t meet our needs.  THEY had factory and capacity issues. The product THEY produced did not meet our expectations.  To make global sourcing really work we need to shift our thinking and become true global partners.

In an extremely competitive global marketplace there is a lot at play.  We are competing against other clients for manufacturing time, shipping capacity, and factory space at the choice suppliers.  Suppliers are dealing with their own capacity issues, labor challenges, and export headaches.  We need something to give us the edge – and this is where thoughtful and transparent demand forecasting comes into play.

While we have become very used to the practice of placing just-in-time orders and hoping that shipments arrive not providing our international suppliers (whom we should begin to think of as partners) with a clear picture of our ultimate needs can become a major stumbling block.  We recommend:

  • Looking further out into your demand needs by reviewing historical and future needs
  • Communicating more frequently and directly with your supplier partner
  • Placing more orders out into the future
  • Adjusting production and delivery dates based on shorter snap-shots in time

We understand that warehousing state-side is expensive, and not ideal, but running out of product and then paying rush fees is not a good way to save money and contrary to the benefits of global sourcing.  Just as we would partner with domestic suppliers, we need to start establishing closer relationships with our overseas suppliers , share our ultimate yearly needs, and work on a production timeline that takes into account our needs and the factories ability to get us our product.

How we present forecasted demand to the supplier, and how accurate that demand is, can ultimately determine the success or failure of that supplier partnership.  Failing to communicate, accurately forecasting, and obtaining manufacturing time can turn the right supplier into your worst mistake.  If we provide the orders far enough in advance, the supplier can react to changes that may affect their production plan and ultimately meet our supply chain needs of product at the right time, right place, and right price at the quality standards we expect.  How is your company handling forecast demands in the global arena?

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