POM Assignment

Name: Hamza Waheed

Registration Number: FA16-BBA-082

Submitted To: Sir Yalman Zafar Ansari

Date: 15 - May - 2019processing of
demand as well.
Question: Relate the diagram to small, medium, and large business categories
and identify where does Sam’s club lie and explain how should it manage its
responsiveness and efficiency levels as discussed in class.

What is demand forecasting?

In retail, demand forecasting is the practice of predicting which and how
many products customers will buy over a specific period of time. Demand
forecasting is typically done using historical data (if available) as well as
external insights. Forecasting helps retailers understand when they need to
order new merchandise, and how much they’ll need to get. When
determining this timeframe, you’ll need to consider the necessary lead time
to help inform your reorder point.
Understand your customer and local market
“To effectively forecast demand, it’s most important to understand your
customer well and their shopping tendencies. Some questions to ask:
 Do my customers shop seasonally or is it consistent year round?
 What sizes and/or colors do my customers prefer?
 Are shoppers partial to certain brands?
 What do shoppers in my local area like?
 How quickly do trends catch on with consumers in my store’s area?
Advantages of Forecasting
An organization uses a variety of forecasting models to assess possible
outcomes for the company. The methods used by an individual
organization will depend on the data available and the industry in which the
organization operates. The primary advantage of forecasting is that it
provides the business with valuable information that the business can use
to make decisions about the future of the organization. In many cases
forecasting uses qualitative data that depends on the judgment of experts.
Disadvantages of Forecasting Models
It is not possible to accurately forecast the future. Because of the
qualitative nature of forecasting, a business can come up with different
scenarios depending upon the interpretation of the data.
 For this reason, organizations should never rely 100 percent on any
forecasting model. However, an organization can effectively use
forecasting models with other tools of analysis to give the organization the
best possible information about the future. Making a decision on a bad
forecast can result in financial ruin for the organization, so an organization
should never base decisions solely on a forecast.
The Walmart way of demand forecasting:
Why is it important to forecast demand in any business?
If the demand is overestimated, it would result in a surplus of
inventory which would result in increasing the labor and storage costs if
workers have to physically move them to the storage facility. In addition to
this, if the business deals with perishable goods, wastage would lead to
further losses and decrease in profit margin.
On the other hand, if the demand is underestimated, there would be
substantial loss of reputation if your business is unable to meet the
customer demands.
Estimating or forecasting future demand is one of the most difficult
challenges in supply chain optimization. It is not only enough to forecast
demand but equally significant are the coordinating activities to meet the
demand in the organization. If it was possible to by synchronize the supply
and demand cycle through the use of real time data, would it help facilitate
the process of forecasting? Yes, and one of the successful implementers of
this approach is Walmart.
Walmart has been able to assume market supremacy due to its
efficient and seamless integration of suppliers, manufacturing, warehousing
and distribution components in its supply chain. Technology plays a key
role in Walmart’s supply chain. They implemented the first companywide
usage of Universal Product Bar Codes where store level information was
immediately collected and analyzed. The data helped the store manager to
determine what products were selling and at what quantity. Accordingly, the
store manager would place orders to the manufacturing division.
They then build the Retail Link Database System that supported
inventory management. Through a satellite network, analysts can access
the Real Link database and forecast supplier demands to the supplier
network which displays real –time data from cash registers and to
Walmart’s distribution centers. Hence by using an efficient Collaborative
planning , Forecasting and Replenishment(CPFR) scheme ,the suppliers
and manufacturers within the supply chain synchronize their demand
estimations. Walmart has also networked with its suppliers and gave rise to
the Vendor Managed Inventory (VMI) where manufacturers would become
responsible for managing the products in Walmart’s warehouses. The
suppliers would deliver the items directly to the concerned stores or
Walmart’s distribution centers.
Demand forecasting primarily deals with analyzing historical data,
generating statistical forecast for old and new products and collaborating
the data with suppliers and internal mangers. However it leaves out the
problems related to uncertainty in the system, unexpected market or social
conditions resulting in shift in demand.