Why Reliable Forecasting is a Must for Supply Chain Partners

Margins are tight and economic volatility is relentless, the ability to plan for the future is invaluable for suppliers and distributors at this time.

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At a time when margins are tight and economic volatility is relentless the ability to plan for the future is invaluable for suppliers and distributors. When supply chain partners are capable of rigorously tracking performance and using that data to make informed decisions about market opportunities, rebates and future trends. They will avoid costly mistakes, improve efficiency and gain a long-term competitive advantage.

Despite the fact that supply chain partners have never had greater access to robust data collection and analysis tools many are failing to fully leverage these resources. The supply chain sector has been slow to digitize, and this has left many suppliers and distributors with antiquated methods for establishing and tracking business goals, managing rebates and forecasting. This prevents companies from addressing problems quickly and capitalizing on business opportunities which is ultimately costly for suppliers and customers.

Supply chain companies have to build their data collection and analysis platforms around where they’ve been, where they want to go, and how they’re going to get there. These steps will ensure that supply chain leaders have visibility on past performance and obstacles and a framework for developing financial goals, an effective rebate strategy and metrics for success.

Know where you’ve been

Companies in the supply chain sector have many sources of historical data. Product demand, previous spend, customer satisfaction, lead and transit times, seasonality and so on. To gather and analyze this data, it’s necessary to focus on visibility across as much of the supply chain as possible. According to a 2022 McKinsey survey, over two-thirds of supply chain leaders have “implemented digital dashboards for end-to-end supply chain visibility,” and the companies that did so were twice as likely to have avoided disruptions at the beginning of 2022.

Supply chain management is always data-intensive because there are so many moving parts that have to be as synchronized as possible. This is all the more important during periods of economic turbulence and when disruptions are common as supply chain leaders have to know what tangible impact this environment is having on performance. It’s also extremely difficult to develop and implement a rebate strategy if supply chain partners don’t have joint access to the historical data which will demonstrate how specific products are selling, what demand looks like in different market segments and how volume is fluctuating.

You can’t plan for the future if you’re uninformed or misinformed about the past. This is why supply chain leaders have to prioritize ongoing data collection while putting the information they’ve already gathered to use in forecasting, rebate negotiations and other critical functions.

Know where you want to go

No matter how much data you have, it won’t do any good if it doesn’t produce actionable insights which drive benefits. End-to-end visibility isn’t just about addressing crises as they arise and mitigating the costs of disruptions. It’s about making data-driven decisions that will shape and execute your overall business strategy. This data will help you formulate concrete goals that are informed by real-world advantages and constraints. A goal is meaningless if it’s either impossible to achieve or so modest that it doesn’t spur innovation and productivity.

Emerging technologies such as machine learning (ML) will have a significant impact on supply chain management. Particularly when it comes to data-driven decision-making. A recent Gartner survey found that 78% of chief supply chain officers (CSCOs) believe ML augmentation will be integral for scenario planning and modeling, while almost three-quarters expect ML to be used for market intelligence and forecasting. Supply chain leaders are expecting technology to play a crucial role in visibility and planning more broadly. 90% of supply chain professionals say visibility technology is a high priority while 69% say the same about predictive analytics.

Supply chain leaders also need real-time data to determine whether they’re on track to meet their goals. It will be much easier for suppliers and distributors to quickly adapt to changing circumstances if they have a clear vision of what goals they’re pursuing and what measures they’re using to gauge progress.

Know how to get there

For today’s supply chains, data collection and forecasting must be collaborative. Supply chain partners should always be in alignment on goals, metrics and need access to a centralized digital platform to maintain transparency and facilitate cooperation. When suppliers and distributors negotiate and base decisions on a single source of truth the likelihood of a dispute falls significantly and their relationships become more sustainable.

Rebates offer a safety net for distributors by providing extra injections of cash based on the purchases and sales they make and it’s critical to know when that money will arrive and how much to expect. Likewise, manufacturers use forecasts not just to ensure they are in control of production requirements but to keep track of how much they owe so they don’t find themselves short on cash at a critical moment. Suppliers and distributors won’t have this information if they don’t develop the digital infrastructure necessary to gather and interpret data, share it with all relevant stakeholders and convert it into actionable insights. 

From the identification of trends to the development of business goals to the implementation of your rebate strategy, data-driven forecasting is only becoming more essential in the supply chain sector. The companies investing in forecasting now won’t just be in a strong position to navigate economic turmoil in 2023 they’ll also build stronger relationships with their partners, limit their risk and discover new business opportunities.