SMT007 Magazine

SMT-July2018

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64 SMT007 MAGAZINE I JULY 2018 Feature by Patty Rasmussen EAST WEST MANUFACTURING Of the many tests in global manufacturing, few are as challenging as mastering the art of demand forecasting. Even some of the best in business can make a mess of it. Forecasting is a skill born out of experience, intuition, and most of all, knowledge. But what do you need to know when you're creating an accurate demand forecast? What data is needed? Are there tools you can use? Where do you start? Let's start by defining a demand forecast. The forecast is a document that plans and controls inventory. It's used to order material or product from the supplier to the customer, typically making stops along the way at the factory and warehouse. The forecast is built by the manufacturer customer service repre- sentative (CSR) taking a customer's historical sales data and projected sales data and figur- ing out how much product the customer needs in stock, how much product needs to be in the warehouse, how much product needs to be in production at any given time. While the customer's input is important, the CSR's own data is vital. They look at how much the customer has ordered in the past and don't just take the customer's word for it. Here's a hypothetical example: Smart Company says it uses 500 PCBAs each month. Armed with that information and knowing that the manufacturer needs to hold components worth three months of produc- tion, Smart Company's purchasing team stocks 1,500 diodes and resistors in the warehouse. There's just one problem. Smart Company overestimated their usage. They only consume 200 PCBAs a month. The manufacturer only needed to stock components for 600 PCBAs in the warehouse, but now they have additional inventory for 900 PCBAs. Not a great feeling. But the inverse is just as bad. In fact, short- ages might be even worse because it's more difficult and expensive to get product to the customer on short notice. Raise your hand if you've had one or more electronic component on backorder for months on end in the past 18 months. There's good news. Overages and

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