The world is changing around us. Technology
is being developed faster than we can keep up with it. These advancements are
even more noticeable in the business world. How this technology is able to link
companies together bringing supply chains across oceans together, creating
global supply chain networks.
This past decade has seen China grow as an
industrial giant due to its cheap labour. The whole world is using China as its
manufacturer to the extent that China’s economy is now the second in the world
just behind that of the USA with expectations that it will overcome even USA’s
economy.
Global supply chains however do face a
dilemma which is how these products after being produced in China are
transported back to Europe or the USA which constitute the major demand on the
Chinese produce. The transportation issue is not the only issue however the
bigger problem is in the time the transportation process takes. In order to
overcome these problems companies have invested in new technologies to help in
the forecasting process in order to anticipate demand. Also new technologies
and processes have been developed for inventory management.
By combining forecasting and inventory
processes companies can maintain the same service level while having their
manufacturing processes in China.
Forecasting has become an integral part of
any business. Companies need to be able to anticipate the quantities that will
be demanded in order to schedule their deliveries taking into account the time
needed for the products to arrive. However as it is widely known no forecast is
one hundred percent accurate which is where inventory management control and
practices are implemented in order to anticipate the variations which might
occur in customer demand and in lead time.
A forecast is generally built on past data
which is generally the past history of demand.
A forecast also has to take into account whether there is a trend in
this past data or for example if there’s seasonality. Some of the more famous
forecasting softwares available today which can work with trends and
seasonality of data are Excel, Minitab, or ForecastPro.
Inventory management, which is the second
part of the equation, also has to be taken into account. Two main questions
have to be answered; the quantity to be ordered considering the shelf life of
the product and if there’s a discount if certain quantities are ordered; and
the second question is when the order should be made.
Global supply chains can therefore be
managed and the service level can be maintained while product prices can be
reduced.
Team WAMDA
A.T. Jan 2012
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