UNDERSTANDING YOUR CUSTOMERS
Whenever you look at demand
history and a forecast, you
need to know how customer
actions impacted the history
or may do so in the forecast
period. Certainly,
understanding when, what,
and how much they are promoting
product that yours may be a
component of is
important and the same is
true if you are a finished
goods supplier.
Gains and losses of accounts
also can cause severe
trend inflation that you
need to dampen. If you have
the option and a willing IS
department, the most
accurate way to deal with
either is to remove the
demand
history for the account. If
it's lost business, then
you've
now got a good starring
point for what the
continuing
business will look like. If
it's new business, it's more
accurate
to forecast the old and new
business separately
and then add the forecasts
together. This will also
eliminate
the possibility of bogus
trends.
But there's so much more to
consider. Could a change
in ownership cause them to
change suppliers or shift
demand considerably if there
are substantial changes
to their marketing? Has
there been a personnel
change
with a preference for one of
your competitors or your
firm? And if you produce
components for a customer
that is switching from
traditional to Just-in-Time
manufacturing, your demand
will certainly look much
different
in the future than it did in
history as lot sizes shrink
and the pattern will be more
closely fitted to sales of
their finished goods.
UNDERSTANDING YOUR
COMPETITION
Also consider any impact
that your competition either
had on historical data or
may have in the forecast period.
Was there a strike last year
that sent more business
your way? If so, I'll bet
that new contract lasts for
more than one year, and
you'd better consider
whether
you've actually gained that
market share permanently,
or if the effect was
temporary.
You must consider their
marketing efforts. Have they
or will they go after your
products or a non-competing
line? Have they made
acquisitions that will leave
them
strapped for cash, so will
promote less, and grow your
share, or did they buy new
market share that will put
them in an even better
position to eat into your
base?
And it's not just their
promotion efforts. It's even
harder to get your arms
around a change in how they
go to market, such as
deciding to become the price
leader, a service standout,
or changes to the variety or
breadth of product offered.
You must understand how
your company will respond or
not respond and how that
would impact your future.
For instance, if the
competition
decided to compete on
service and your company
decided to combat with
price, the one certainty is
that
you'll need to forecast more
units to make up the same
revenue. Or if your company
decides not to respond,
consider that your growth
trend may dampen or decay.
To Be Continued
For balance of this article, click on the below link:
Lean Manufacturing Articles and click on Series 15