Forecasting in Supply Chain


The forecast of demand forms the basis for all strategies and planning decisions in a supply chain. Consider the pull/push view of the supply chain. Throughout the supply chain, all push processes are performed in anticipation of customer demand whereas all pull processes are performed in response to customer demand. For push processes, a manager must plan the level of production. For pull processes, a manager must plan the level of available capacity and inventory. In both instances, the first step a manager must take is to forecast and what customer demand will be.

Mature products with stable demand are usually easiest to forecast. Staple products at a super market, such as milk or paper towels, fit this description. Forecasting and the accompanying managerial decisions are extremely difficult when either the supply of raw materials or the demand for the finished product is highly variable. Good forecasting is very important because the time window for sale is narrow and if a firm has over- or under-produced, it has little chance to recover. For a product with long life cycle, in contrast, the impact of a forecasting error is less significant.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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The Product Life Cycle


Customer demands are constantly changing. There are many reasons for this, ranging from fashions to new regulations. Sometimes there are obvious patterns to demand. Another pattern comes from the product’s life cycle. Demand for just about every product follows a life cycle with five stages:

  1. Introduction. A new product appears and demand is low while people learn about it, try it and see if they like it—for example, palmtop computers and automated checkouts at supermarkets.
  2. Growth. New customers buy the product and demand rises quickly—for example, telephone banking and mobile phones.
  3. Maturity. Demand stabilizes when most people know about the product and are buying it in steady numbers—for example, color television sets and insurance.
  4. Decline. Sales fall as customers start buying new, alternative products—for example, tobacco and milk deliveries.
  5. Withdrawal. Demand declines to the point where it is no longer worth making the product—for example, black and white television sets and telegrams.

The length of the life cycle varies quite widely. Each edition of The Guardian completes its life cycle in a few hours; clothing fashions last months or even weeks; the life cycle of washing machines is several years; some basic commodities like Nescafe has stayed in the mature stage for decades.

Unfortunately, there are no reliable guidelines for the length of a cycle. Some products have an unexpectedly short life and disappear very quickly. Some products, like full cream milk stayed at the mature stage for years and then started to decline. Even similar products can have different life cycles – with Ford replacing small car models after 12 years and Honda replacing them after seven years. Some products appear to decline and then grow again—such as passenger train services which grew by 7 per cent in 1998 and cinemas where attendances fell from 1.64 billion in 1964 to 54 million in 1984, and then rose to 140 million in 1997.

One thing we can say is that product life cycles are generally getting shorter. Alvin Toffler says, ‘Fast-shifting preferences, flowing out of and interacting with high-speed technological change, not only lead to frequent changes in the popularity of products and brands, but also shorten the life-cycle of products.’

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Management of the Life Cycle


The traditional branching tree control structure within an organization is simply not designed to cope with the ever changing management requirements dictated by the life-cycle changes within a large project. The fact that various input and output measures vary over the project’s life suggests that project management must focus on universal project dimensions such as cost, time and performance (quality).

As an example of how interface problems vary over the life of a project, consider the two functions of R&D and production over the life-cycle of a given product. Before the introduction of the product, R&D must be closely matched with production. R&D may be doing reliability tests which will lead to engineering changes. Production will be doing production design and process planning, which may be affected seriously by engineering changes. Thus, good communication is essential to avoid wasted resources in production.

On the other hand, in the growth phase R&D is likely to be focusing on developing the next product, while production will be ramping up production and producing long runs to avoid production losses due to setups. Thus, there will be relatively little explicit conflict between R&D and production at this phase.

In the decline phase, R&D will be in the design phase on the new product and will withdraw all R&D from the declining product. Production will be heavily involved in cost control. Again there will tend to be no apparent conflict, but good managers will make sure production is adequately consulted on the new design.

It is clear from the example that a full project management structure which focuses on future products as well as current products can help R&D to interact in a more useful fashion.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Bases for Market Segmentation


Two broad types of variables are commonly used for market segmentation. Socioeconomic characteristics of consumers, such as gender, age, occupation, income, family life cycle, education, and geographic location make up one type. The other type consists of behavioral variables, including benefits sought from products and services, usage behavior, lifestyle, and attitudes. For industrial buyers, socioeconomic characteristics may include company size and location, and industry or customers served. Behavioral variables may include purchasing objectives and practices as well as product and service benefits. The appropriateness of any one or combination of variables in a specific situation will depend on whether or not a variable relates to purchasing, use, or consumption behavior and responsiveness to marketing programs.

The choice of variables to use to segment a market often depends on insights into buyer behavior, provided by creative research. Even people with similar usage needs often have differing lifestyles representing various value sets. For example, some people have an active lifestyles in which sports and fitness play an important role, while for others arts, fashion and trends may be very important.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Life-Cycle Management


All projects have a natural life cycle from birth to death and that changes inherent in the life cycle cause shifting interfaces and broad changes over time which dramatically increase the need for the project management approach. This life-cycle property is also shared by product sales and systems development.

 The product sales life-cycle is probably the best known. Between the point of introduction and the final removal from the market (replacement by another product is more complicated) there are roughly four phases:

a)    Introduction

b)   Growth

c)    Maturity

d)   Decline

 Actually, a product must go through research and development stages before it is introduced on the market. If we add these phases to the product  we would have a larger cycle similar for products/projects/processes.

 Full Products/Projects/Processs Life Cycle:

  1. Pre-design phase—The product/project idea is born and given early evaluation. Early forecasts of performance, cost, and time aspects are made, as well as of organization and resource requirements. There is a high mortality rate in this phase.
  2. Design phase—A much more detailed design of the project/product is developed and its feasibility and desirability are determined.
  3. Pilot testing phase—An actual prototype of the product, system, or difficult prices of the project are made, tested, and redesigned as necessary.
  4. Startup/Introduction phase—The product is introduced or the main project is started up.
  5. Rampup/Growth phase—Product sales grow, and the product is expanded to its full volume.
  6. Mature phase—Sales are full, as is the project effort size.
  7. Rampdown/decline phase—Sales decline, phasing the project out.
  8. Termination/divestment—The product is removed, the project is stopped, and the system is sold.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Financial Analysis: Real Problems


The term financial analysis  when applied to new products conjures up visions of sales forecasts and profit calculations. By using traditional financial analysis, we can get a good read on the current proposal.

 Actually, sales forecasts and financial analysis systems are no problem as such. We have an immense warhead of forecasting methodologies, most based on many years of experience. We know, for example, what makes for sales. This model does an excellent job and serves as the basis for some very advanced mathematical systems used by some of the most sophisticated new product marketers in the world. And every firm has people who can make an income-statement-based net present value calculation (using discounted cash flow methods). We have had years of experience with it.

 The financial model requires product cost, prices, the current value of money, probable taxes on the future income, the amount of further capital investments that will be required between now and when we close the books on the product and much more.

 They will never be certain, even after living out the product’s life cycle. Sales will be known, but we might have had a better marketing strategy. Costs are always just estimates. We will never know the true extent to which a new item cannibalized sales from another product. If we had not marketed the new item a competitor probably would have. And on and on.

 The fact is, we rely on estimated. Management’s task is ot to make the estimates as we can and then manage around the areas of uncertainty in a way that we do’t get hurt too badly.

 On minor product improvements we do this pretty well. On near line extensions, we also do well, but with more misses. Totally new products, using technologies never so applied before, are pure guessing games.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight