Reimagining demand forecasting in the supply chain

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For as long as supply chains have been in existence, there have been supply chain disruptions. Natural disasters, supplier bankruptcies, labor strikes, climate-induced weather emergencies and other unfortunate events have snarled supply chains. However, the black swan event of COVID-19 amplified all these challenges and forced many companies to take a fresh look at how they manage through disruption. The goal isn’t just to come out on the other side but also delight customers while growing revenue.  
This was at the heart of a recent Big Ideas in Supply Chain podcast conversation between Lynn Torrel, Chief Procurement and Supply Chain Officer at Flex, supply chain innovator Angel Mendez and Kinaxis Chief Strategy Officer, Dr. Anne Robinson.

At Flex, a global electronics manufacturing services and original design manufacturer, Lynn is responsible for managing one of the most complex and sophisticated global supply chains in the world. Because she’s been onboard in this role since 2019, her experience prior to and throughout the pandemic is rich with insights regarding the supply chain’s need for more accurate forecasting going forward.    

Here’s a brief conversation recap.  

The challenge of aligning supply and demand 

In the fast-paced and constantly changing electronics industry, one of the biggest challenges is forecasting demand. Customer expectations have shifted to a post-COVID world while in some circumstances, suppliers still operate as they did during the pandemic, causing a mismatch between supply and demand. And then there’s the proliferation of electronic components like semiconductors into products that previously didn’t require sophisticated technology. Take for example, a mattress company. They were historically a single source product company, but now newer technologies involved in making and selling this product means they can’t sell a single mattress without the electronics connected to it.   
All of this means OEMs must consider longer lead times where investments made today create output 18 months from now. It’s a significant challenge to provide accurate information about future constraints both upstream and downstream as disruptions and changes happen in real-time. 
Adding fuel to the fire is the geopolitical risk surrounding the semiconductor industry. Companies employ nearshoring and multi-shoring strategies to reduce risk, however this complicates supply channels and signals because a once-linear process isn’t as straightforward as it used to be. When demand outstrips supply, companies may make rash investments to increase capacity – such as working with multiple suppliers to get a product when and where it’s needed. The problem surfaces when the forecast decreases, even by a little bit, and these companies are left with excess parts for three or four quarters. Clearly, the old ways of forecasting demand aren’t cutting it.  

Collaborating for a better way to understand true demand 

Lynn says that although Flex was fortunate enough to be “data rich,” thanks to a digitalized supply chain – yet there was a certain stagnancy that dated back to pre-pandemic times surrounding how that valuable data was used. “We needed to do something different. In fact, as supply chain professionals living through such a disruption that had implications around the world, there’s almost an obligation to work together to come up with new and innovative ideas.” 
So, Lynn spent several months gathering an independent group of constituents from various supply chain functions such as OEMs, EMS, distributors and suppliers to join The True Demand Coalition. The group’s goal is to bring leaders from across the industry together in a collaborative and non-competing way to come up with a new way to forecast demand and mitigate future supply chain disruptions. They looked at industry reports on growth targets and macro-economic impacts to be able to rationalize the supply chain to provide better information, both upstream and downstream. This second source of rationalized demand data combined with the original raw data provides a greater source of information that enables more informed decisions.

Lynn shared how being armed with this information informs better decision making. “OEMs can make better design decisions knowing what potentially might be impactful in the future. Semiconductor and IP&E suppliers can make better investment decisions knowing what their true demand is.” Pairing contextualized data with external demand signals and applying analytics and AI can deliver a better understanding of true demand. Equipped with this insight, supply chain leaders can make more informed decisions and mitigate future supply chain disruptions. 
Lynn is not alone in this concept. Lora Cecere, the founder of research firm Supply Chain Insights, talks about using outside-in supply chain planning processes to keep a pulse on market data and signals to reduce latency, decrease the bullwhip impact, drive organizational alignment and better visualize options. Lynn’s vision for The True Demand Coalition could be a step on the road to achieving outside-in planning.  
This kind of forward thinking by Lynn and other supply chain leaders will serve the industry well as we navigate the next disruption – big or small.  
To watch the entire conversation, click here:  

Big Ideas in Supply Chain graphic with red, green, blue and yellow circle designs and black and white headshots of three speakers with the text: Reimagining demand forecasting in supply chain
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