Forecast Demand Or Shipment?

NEW DEVELOPMENTS IN BUSINESS FORECASTING Larry Lapide, Research Director, Supply Chain Planning Advanced Manufacturing Research FORECAST DEMAND OR SHIPMENTS? (This is an ongoing column in The Journal which is intended to give a brief view on a potential topic of interest to practitioners of business forecasting. Suggestions on topics should be made via email to llapide@advmfg.com. Ed) Forecasters out there that are currently using a product’s historical shipment (or sales) data to forecast customer demand should take heed. Use of this data may be dangerous to your demand forecasts! The primary reason for this is that a shipment-based forecast may not be a clear indicator of what your customer’s demand for a product might be in the future. A best practice in supply chain operational planning is to start with a ‘true,’ unconstrained forecast of customer demand. This is then used as a basis for the development of a supply plan composed of distribution, production and procurement plans. If supply is constrained and all forecast demand cannot be satisfied, areas for improving these supply shortages can be identified and eventually corrected. However, if planning starts with ...