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Demand outlook across different time horizons often give conflicting signals.
Companies use various methodologies to get the demand outlook for different time horizons. Short term outlook is normally used for finished goods deployment using replenishment principles. Medium term outlook is used for procuring long lead time items, manpower planning, capacity planning, and cash planning. Long term outlook is useful for capacity expansion, portfolio decisions.
While longer horizon forecast considers the impact of demand drivers, new product introductions, it usually misses out on the demand patterns at the granular level. On the other hand, shorter horizon predictions consider these patterns but often miss out on the impact of demand drivers. As a result, these outlooks don’t reconcile at the horizon intersections, which creates stress in execution.
Smooth functioning of supply chain execution requires that the outlook should reconcile across all the horizons. It warrants that we consider both the demand drivers as well as the granular level demand patterns in making predictions.
Very few companies have designed their supply chains to leverage this aspect. A well-designed Demand Driven Supply Chain addresses it quite well.