I was reading the newspaper this morning and I’ve found a very interesting news about the forecasting of the demand and I am going to share it with you because it is very closed to what we have learnt in the Beer Game.
The article tells that with the arrival of Christmas, sales are more unpredictable and companies have uncertainty about what they have to produce. In some cases, a firm should start producing in August in order to not have stock out in Christmas time.
Considering that firms have limited capacity, techniques for forecasting demand are really important nowadays. With these techniques, companies are able to develop effective process planning and, consequently, avoid stock out or excess of stock. Using the forecasting demand, it is possible to plan production orders on machines, work shifts associated with these machines and also orders for raw material or auxiliary material.
The article also tells that there two type of methods to do the prevision. On the one hand, there are univariate models that use historic demand to do the foresights. On the other hand, there are multivariate models that allow introduce other factors to do the prevision such as commercial budgets, meteorological variables that can influence sells, information from another agent in the supply chain and so on.
The advantage of the second method is that the personalization on the model leads to better previsions because it will be more adapted to real needs.