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Cost Estimation Lead TimeImplementing a Feasibility Study Looking For Suppliers Getting SamplesPerforming Due DiligenceDevelop First PrototypeContract NegotiationsAnalyzing Your Production LineEstablishing Costing SystemChoosing the Right PackagingPost-Production Quality ControlIntermediary ServicesFinding the Best LogisticsDemand Forecasting
Cost Estimation in the Manufacturing Industry
With my experience in working for a retail company, my boss used to spend days on cost estimation without executing any actual work until the cost estimation process is done. This made me feel how crucial cost estimation is to any business/project. Let us learn the strategies that will help us get on top of cost estimation and make sure we are on the right track towards profitability.
The biggest challenge for a business owner or project manager is to cover all aspects of the business plan at the right preferences within the budget set for it. There may be chances wherein some of the expectations are not met due to budget constraints. This is why controlling costs via cost estimation is very critical to the outcome of businesses and keeping costs at the lowest possible is a must.
Helpful Tips to Estimating Costing
1. Trust the client/company relationship
Establishing trust between parties is the most important step for a procurement plan and you must work alongside to be cost-effective and at the same time make sure you are sticking to the budget allotted for the project.
The most common step by step process for this in any manufacturing company is to map out the production plan at the start of the project based on the marketing calendar. Allot money for specific initiatives and discuss how to cut expenses in some areas to help improve others. This is an effective process to work around the budget and at the same time double executions.
2. Highlighting packaging and shipping fees
Before I joined my present company, I worked for a successful manufacturing company as a marketing executive and our very own CEO served as my mentor in there. He always highlighted packaging and shipping fees as vital parts of our cost estimation process.
That was when I realized, how big factors these items are towards cost estimation and I have cherished this idea up to this day.
A lot of money can be worked around packaging and shipping processes. You can greatly cut down expenses or reduce costs as long as these aspects are well planned out. For example, you can outsource custom product packaging to other companies at a cheap rate which allows you to save up on machinery expenses.
You can also hire courier services to do shipping for you and they can give you discounts as long as you exclusively hire them for such service. The following would have a huge impact on cost estimation depending on your approach.
3. Fewer expenses mean less risk
This is the most underrated tip that people in the manufacturing industry often overlook in project/product cost estimation. When you have fewer variables in your procurement plant then there should be less room for risks.
If possible, merge variables or eliminate possible expenditures so that your costing is only focused on the vital parts of the project. Having fewer risks should translate to a better chance at success.
The Trick to Reducing Lead Time
When it comes to lead time reduction, you need to do the most out of the little time that you have. Getting things done fast is a must in the world of manufacturing. However, it’s not just about how many products are produced in a single day but also the amount of work being put in to create each product.
This is why you often hear of the term “lead time” in most manufacturing companies and why bosses are concerned with “lead time analysis“. I personally label lead time and activity as calendar time and clock time respectively.
Calendar time is the amount of time spent on job order up to its completion while clock time is the amount of work to get things done. For example, if a project is required to be done in a week then your calendar time will not be affected as long as you finish the project in a week but you can improve on your clock time if you do the work faster. Only one of them can be a factor in your lead time analysis purpose.
The goal of lead time analysis is to deliver as fast as you can and make sure the gap between the request of order and delivery is the shortest time possible. Just to remind ourselves, studies have proven that the first product sample or proposal is most likely chosen 85% of the time.
Sometimes it’s not about being top quality or having a reasonable price, it was simply being the first out there and this is what lead time analysis is all about.
Key Strategies for Effective Lead Time Analysis
As I have become conscious of lead time analysis, I tend to work in parallel instead of a series in order to multi-task. As long as I don’t have my hands full on a task, then I make sure to do something else at the same time. Multi-tasking is basic for effective lead time analysis.
2. Avoid handoffs
Keep in mind that each handoff requires the work to stop before it resumes again which is bad for lead time analysis. The gaps in between can cause a delay and sometimes an inevitable error could disrupt the entire process. If you are into lead time analysis then avoid handoffs as much as possible and this can be done by giving employees the right tools that they need.
3. Shorten steps/processes
This strategic lead time management can also be attributed to avoiding handoffs as cutting steps or shortening processes does that and eventually reduces lead time. Simply assess all the processes involved in work being done within your company then eliminate or if possible, create shortcuts but make sure the objectives are still met.
4. Take advantage of technology
This is most of the time an overlooked factor in lead time analysis. Just as much as you love shopping, consider shopping for technology and tools a hobby as well to help boost your company’s productivity and efficiency.
5. Maximize capacity
You do not have to do this by hiring more employees but simply by compressing work being done by each employee. Maximize their capabilities and make sure you are able to squeeze the most out of them in a single shift. This strategy would definitely have a huge impact on your lead time analysis.
Properly Implementing a Feasibility Study
A feasibility study, as the name implies, is a study used to determine if a solution to a problem is viable or not. Ensuring this solution is legal, technically and economically feasible is the main goal of a feasibility study. It’s particularly important for custom contract manufacturing.
In a feasibility study, before the solution is deemed feasible, the cost required to do the project and the value it delivers must be evaluated. In our company, we first consider the needs of the company and the goals they are trying to achieve.
All of these feasibility study factors may affect the outcome of the project are then put into consideration as well. Here is a brief overview of how we do project feasibility study for our clients.
Basic Overview of our Feasibility Study Report
A feasibility study is a complex process as it involves a slew of different other processes to complete the report. Some of these processes may not be needed for some projects but most of the time they are vital to the entirety of the project to get the client/s started.
1. Data Gathering
In this process, we gather all the data and information available to help support the cause and purpose of our client. Some of the most useful information are demographics, competition, statistics and even current trend or news revolving around the project and the industry to where it belongs.
In one of our project feasibility analysis for our client which is a retail manufacturing company trying to expand their services to a new country, the data we gathered included customer behavior and buying methods in the particular country.
These data and information really paid huge dividends for the company as they were able to prepare well and modified their marketing and business model towards the data we presented to them.
2. Cost Estimation
Some consider this process to be under data gathering but we take a look at it in a different light because it serves to be very vital to the whole feasibility study report. We consider all the possible expenses and then work around the budget set for the project. As much as possible, we look for the most cost-effective options to save some cash without compromising the quality of the client’s service or product.
3. Data Analysis
Once we have prepared all the available options for the client. We now give them some time to analyze their options and the best way to do this is to provide advantages and disadvantages of each option to help give the client a clearer picture of what they have.
We also compare and contrast the prices they have to spend on each option for them to easily weigh in on their choices.
4. Provide a Project Timeline
Lastly, we provide a timeline for the entire project before it starts operating. Reasonable lead times for each quantity are also provided so the project manager will have an optimum timeline to look at for the business plan. There could be some changes along the way, but these feasibility study factors are also covered within the project timeline as these iterations could inevitably happen.
Properly Looking For Suppliers
While we do feasibility study reports for our clients to determine whether the project they are trying to invest on is most likely to succeed; our services are not just limited to it, as we are more than willing to cater to them beyond feasibility studies such as conducting supplier assessment.
When manufacturing/production companies are bound to operate, they need to have suppliers who will provide them with the materials they need to sell products to their possible customers. These suppliers are not hard to find since there are a lot of them in this industry. The only problem is you must execute the supplier assessment procedure properly, so you’d be able to tap suppliers which will be assets to your company and not become liabilities.
Most companies settle for the cheapest available supplier without weighing on other options revolving around the supplier selection process. It’s completely understandable pricing is a major factor in supplier assessment but focusing exclusively on this aspect is wrong because other factors get overlooked in the supplier assessment process. Here is our simple guide on how we do supplier assessment for our clients. The exact procedures depend on the industry, so whether you want to manufacture custom clothes, custom plastics or custom electronics.
Supplier Selection Criteria
1. Value for Money
This criterion is basic in our supplier assessment process. Instead of looking at cheap pricing, we weigh the services potential suppliers can provide based on quality, technology, and tools suppliers use to render services as part of supplier evaluation.
By doing so, we are assured our clients get the most out of what they are paying for in their suppliers. At the same time, we stick to the budget set for suppliers and not go beyond to stick to the cost estimation process done beforehand.
2. Service Quality
Supplier assessment determines service quality. The quality of your supplier’s services should be attributed to their consistency in delivering the goods. They need to be on time according to the schedule both parties have agreed to. There is never a reason to be late in the world of business and it is a fact. The supplier assessment process verifies this part very well.
Always keep in mind if suppliers are not reliable then this could right away reflect on to your company for being unreliable to your customers as well. For example, if you go to the department store to purchase something but is currently out of stock, you would not blame the supplier directly for such mishap but be pissed off at the store for the moment. Reliability is a major concern in our supplier assessment process.
4. Open Communication Lines
Suppliers need to be honest in case things go awry on their end. They must tell you if they will be late or if they are out of stocks so at least your company can prepare for a viable solution to your possible customers.
You must think of your supplier as a tag-team to whatever it is you are doing and not simply another company working on your behalf. Honesty and open communication lines are must-haves in our supplier assessment procedure.
5. Credible Reputation
Supplier assessment also checks if a potential supplier is reputable in and around the industry you are in. They should have past and present clients who can speak positively on their behalf. Their good reputation should automatically say they have the characteristics you want from a supplier and this is a big plus for supplier assessment.
Getting Samples to Verify Quality
Following the supplier assessment, we will be tooled with knowledge of supplier/s we have chosen to work with, we must find out the quality these suppliers can offer and not just stick to the supplier evaluation.
This phase is the sourcing and procurement plan. However, there are different kinds of samples these suppliers can give. What exactly do we need and how do we assess the product samples given to us during the sourcing and procurement phase? We first need to differentiate the different product samples suppliers give. Looking into how to get a prototype made is not necessary when you have a standard product that can be customized.
Types of Product Samples for Sourcing and Procurement
1. Factory Sample
It is a ready-made product from the supplier produced without the specifications of the new client. The factory sample is a clear evidence of the supplier’s capabilities. In our experience doing the sourcing and procurement plan, suppliers often give out their most popular product as factory sample to play it safe.
2. Pre-Production Sample
It is a product sample produced based on the client’s specifications. Clients rarely get satisfied with the first pre-product sample presented to them and revisions are unavoidable. This situation is when the supplier assessment process becomes instrumental, because if you were able to gather multiple potential suppliers, then you should have multiple pre-production samples to quicken the sourcing and procurement process. As a result, work is more efficient compared to having a single supplier.
3. Batch Sample
This is a sample collected from a batch of manufactured goods for product testing purposes, quality check and functionality tests. It is ideal for a third party to collect the batch sample to make sure the supplier does not interfere with the selection process and this usually applies in most sourcing and procurement strategies.
Most of the time, our company focuses on creating pre-production samples. We draft a document called Sample Order Terms as a part of our effective sourcing and procurement strategy to make sure the client’s needs and supplier’s capabilities are immediately met which saves time and avoid revisions. We cannot move past the sourcing and procurement phase as long as Sample Order Terms aren’t filled out.
Sample Order Terms Information for Sourcing and Procurement
- Photo/illustration of the design
- Preferred color
- Product category/industry
- Order quantity
Other product specifications exist which we may need for our sourcing and procurement process but the ones mentioned above are by default the specs we ask from clients and our suppliers require for our sourcing and procurement plan.
Performing Due Diligence on Selected Suppliers
The number of fraudulent cases revolving around companies and organizations in China was significantly alarming last year. As a company whose operations involve other Chinese companies whether as clients or suppliers, this was major news to us.
We stand behind our due diligence process to protect the company from fraud and delinquents. The term Due Diligence is commonly associated with mergers and acquisitions to ensure value opportunities for both parties. In the world of business, there is no standard when it comes to the process but there could be multiple variations and templates depending on the company.
Due Diligence can be quite complex as it covers a lot of ground. There are four major areas due diligence covers namely financial, operational, legal and strategic. All these areas are assessed by the process to gauge progress, success and potential failures for the benefit of the company and its partners.
How We Conduct Due Diligence
We mainly perform due diligence revolving around the concept of legalities. It is safe to say our process is so simple. We only do minimal assessments such as permits and certifications to make sure our clients and suppliers are legal to operate their services. Certifications are also necessary to further prove their credibility and assure we are dealing with authentic clients or suppliers.
The company also checks at least three key products the manufacturer, supplier or client are responsible for. It would be easy for our company to verify their work quality through their most notable products. If they are still new to the industry, we can use their website to research about their company and services, but we cannot include any information of the website to be used in our due diligence report because of its biased nature.
We conduct due diligence not only for checking the authenticity and legitimacy of people we work with, but we are also doing this vital process to look for potential suppliers, manufacturers, and clients we would like to work with, in the future.
Developing Your First Prototype
Prototype manufacturing is one of our company’s biggest strengths: You ask us to build a design from scratch, and we find ways to create it. The act of making a prototype, however, is often confused with the act of procuring a sample. Sample procurement is the modification of a product already existing on the market, while prototyping is the creation of a product yet to be produced.
Prototype manufacturing requires lots of time, effort, and resources. This is the same reason why we don’t see a lot of prototype manufacturing companies even though they are active in OEM manufacturing. It also involves a lengthy process (particularly with hardware prototypes) and may include a lot of trial-and-error.
Most companies feel there are opportunities lost in this time-consuming process which is why they choose to shy away from this service and focus on other aspects of manufacturing. These companies miss out on being a part of a breakthrough product (which is supposed to be the goal when you’re in a very tough and competitive industry).
How we Greatly Reduce Costs in Prototype Manufacturing
Expensive costs have always been associated with prototype manufacturing. However, this association forever changed ever since 3D printing technology was introduced. 3D printing allows manufacturers to create prototype models through visual graphics before physical prototyping. This technology allows OEM companies to save thousands of dollars on prototyping and speeds up the process of sending prototype models to clients.
Some clients and manufacturers are hesitant about 3D printing technology years ago since they were used to traditional prototyping but these days more and more sourcing and OEM companies have succumbed to the technology. 3D printing technology has a huge impact on our prototype manufacturing process and is already considered vital to our company.
Advantages of Prototype Manufacturing
Based on our experience, the biggest advantage of prototype manufacturing is the fact we can test the product’s functionality before we mass produce it. This process helps avoid losing money in case it ends up a bad product.
Always keep in mind designs and ideas only work as theories until they are further tested out and proven. With a prototype, you can also test out materials used in the product and switch to a different option in case some materials do not perform well.
Lastly, you can test the supplier’s ability to create the product. There could be expertise and specific knowledge involved in certain products and some suppliers are not capable of producing them despite their claims of having the ability to do so.
Contract Negotiations with the Supplier
Our contract negotiation process involves multiple factors along with terms and conditions which are tightly considered before a final contract gets signed. Here are a few factors to our contract negotiation process you need to know.
Factors to a Contract Negotiation Process
The most common reason why disagreement arises in the contract negotiation process is due to pricing. Most companies we come across right away go for the lowest production cost which is practical but wrongdoing. Always keep in mind quality comes with a price. Other aspects such as plastic injection mold cost and upfront industrial design expenses should be considered as well.
If you go ultra-cheap then quality is surely sacrificed. The people we end up signing contracts with are usually reputable and the pricing towards their services are justifiable which is congruent to our goals in this company: provide quality service at a reasonable price.
2. Service Quality & Delivery Time
Quality of service and delivery time are very important components and are primary concerns for the terms and conditions during the contract negotiation process. You need to be assured of their service quality and they should promise to deliver on time.
If both parties cannot meet on these factors, then a contract drafting is not happening any time soon. Also, you must hold a party liable in case they fall short of the standards set or be tardy in delivery time. This clause should be discussed clearly during the contract negotiation process.
3. Communication & Culture
There must be clear communication lines between our company and the suppliers or manufacturers we work with. We understand things could go wrong somewhere in the production and they could be inevitable.
They must be honest with us, so we can prepare our ad hoc processes to suppress the issue. If these issues are not communicated right away, then problems would reflect badly on our company and to them as well.
Understanding your potential business partner’s culture is important because even if work is constant, our approach and behavior towards it differ depending on our cultures. In our experience working with different nationalities, we modify our terms and conditions compliant with the other party’s culture and yet stick to our company’s standards.
Analyzing Your Production Line
This process is much like the supplier assessment except this time around we dig deeper into the supplier or manufacturer’s system/processes, operating procedures, and production standards. We would not really intervene to how they do the following, but we only want to make sure these factors are in line with the company standards and our own expectations from them.
What is a Production Line?
A production line is the process flow of manufacturing a product. It starts with the materials and components of the product, the creation process and up to the end of the line when the final product is materialized.
The manufacturing production line can easily be described through words but the actual process including the micro-processes involved can really be tedious. However, you really must go through production line assessment if you want to significantly decrease costs, achieve the best quality and implement good manufacturing practises.
As a globally competitive sourcing company, we want our manufacturers and suppliers to follow an optimized production process for their production. In the world of manufacturing, this term is known as “Lean Operations” which is one of the components of the Lean Manufacturing operation system.
Most production processes are underutilized and could follow rudimentary methods, which is why it is important for us to assess them from time to time. Helping them achieve an optimized production process will not only help our company but will also benefit them to improve their services.
Establishing a Scalable Costing System
As we have previously discussed, our company assists suppliers through production line assessment to ensure quality in manufacturing products and this goes the same way when it comes to setting a product costing system. We make sure products are priced the right way which is why we have established a product costing system in this company.
Components of a Product Costing System
1. Material Expenses
This product costing system component must be basic when it comes to calculating product costs since material expenses are where most of the capital goes in terms of production. Material costs also include freight expenses, storage fees, import duties and other expenses directly attributable to material acquisition.
2. Labor Expenses
This component involves overhead labor costs and all the personnel costs required to get the product done. Salaries, payroll costs, and third-party services fall under this product costing system category as well.
3. Factory Overhead
These are expenses that cannot be categorized under direct material costs nor labor costs but are still vital to manufacturing the final product. This component may include manufacturing supplies, utilities, rentals, repairs, and other indirect material or labor expenses.
4. Taxes, Duties, and Fees
This used to be a minor factor in our product costing system when we started the sourcing business but has fully come to play when we started doing business in China. Unlike most countries, China has a very complex structure when dealing with their customs.
Even though they also apply the 3 main type of taxes (value added tax or VAT, consumption tax, and customs duties) for importing products much like in most countries, the rules for each type of tax are very much different compared to what is traditional in other countries.
This is why you need to have a complete understanding of the fees you will be paying for at the customs so you can incorporate them as part of your product costing system.
Calculating Product Costs
Companies follow different formulas for establishing a product costing system. Here in our company, we follow the standard product costing system in the industry which is to divide the total production cost to the number of units produced.
The quotient is the production cost per unit and should be the basis for the actual sales price of the product upon considering other factors such as competition, availability and a lot more.
Any amount applied beyond the production cost per unit is already considered as your potential profit and values below the production cost per unit are the loss to the company. This process is how our product costing and pricing is established.
Choosing the Right Packaging
In the world of manufacturing and retail, product packaging is not simply a process we do but it’s more of an art. In fact, product packaging services have become an industry on its own as there is an increasing number of companies who are exclusively into packaging without manufacturing any products or able to render other services.
Packaging not only contain and protect the product from transportation hassles, but it is also very instrumental aesthetics-wise. Always keep in mind, product packaging is the first thing customers see and not the actual product. In fact, product packaging design could be the key factor which will set you apart from the rest of your competitors.
Factors to Consider in Product Packaging
1. Suppliers should understand your needs.
Open communication lines between supplier and client are the keys to make sure the needs of the latter get understood. This factor is important not only in product packaging but also in all aspects of manufacturing and production much like in the sample procurement phase, prototyping and the likes. If there is constant communication between parties, then understanding the client’s requirements and supplier’s capabilities should be easier.
2. Going for a low price without compensating quality.
Quality product packaging does not always have to be expensive. If you are keen enough to shop around, then you can always find suppliers who can comply with your needs without going out of your budget. However, make sure you do not settle for the lowest price or else the quality will reduce.
3. Professionalism on both ends.
It should be expected of you to be professional as a client when it comes to dealing with suppliers and manufacturers. This way, it is a must for your partners to reciprocate the professionalism you show them. This factor should cover being able to deliver on time, commit to schedules and follow instructions. Decent product packaging solutions can only be expected if your supplier or manufacturer shows professionalism and this would right away reflect the outcome of the product.
4. Hold your packaging company accountable.
The supplier you are working with must take responsibility for any errors and accept the blame in case things go awry in terms of product packaging. This quality goes to show the product packaging company you are working with lives up to standards and is professional enough to admit mistakes.
Always remember you are not solely responsible for the product packaging task and they should stand behind the issue in case problems arise.
5. Always go for samples.
Never mass produce a product until you know the final product packaging used. Even if you have a top-quality product on hand, everything could go wrong once the product packaging is bad enough wherein it does not compliment the product. This situation makes sampling very important to make sure you and the supplier are both on the same page in terms of expectations of the outcome of the product.
Post-Production Quality Control
Establishing a quality control plan is a must when you are a sourcing company working alongside couriers, suppliers, and manufacturers. In this type of business, you cannot always expect to get the perfect product every single time but having a robust quality control plan helps assure you in this aspect.
So even if every batch may not be perfect, they may at least live up to your standards and expectations all the time. This is a brief introduction to our quality control plan and how we protect the business to make sure our clients are satisfied 100% of the time.
Defining Quality Control
The quality control plan aims to identify any form of issues affecting customer expectations and may deteriorate your service quality. If such issues are identified right away, then customer relations remain nurtured for better long-term relationships and prevent future problems.
The product quality control does not only cover the actual quality of the product and factors revolving around the manufacturing process but rather focuses on the service quality in general. In our company, we do not only care about product quality but also checks on delivery time and production schedules.
Even though some of these are beyond our control, we still try to oversee these processes because we believe we are responsible and liable in case the schedules fall behind and production is delayed. Our quality control plan plays its part before, during and post-production.
You can choose to hire a product quality control company to facilitate your quality control plan. There are a lot of third party inspection companies who are willing to do the dirty work of quality control in exchange for a cheap price.
]However, if you really want to be hands-on with the process of creating a quality control plan then you can form a team under your company tasked to do the quality control process. Always keep in mind this option could be a bit more expensive considering additions to the payroll and other expenses.
Protecting Your Investment with Intermediary Services
Intermediary services are very instrumental to supply chain management and manufacturing businesses. Without these services, there would be no flow in transporting products from manufacturers up to the end users.
It would be much more efficient if a third party intervenes in talking to all the suppliers instead of customers communicating with them one by one. They can also be described as “the middleman” but their intermediary services really go beyond than transacting with suppliers and customers.
Different Types of Intermediary Services
1. Intermediary services as agents/brokers
They usually represent the manufacturers in playing this role and they are the ones responsible to look for stores/merchants who are willing to purchase the product. They add a small percentage to the product’s price which serves as their commission or broker’s fee.
2. Intermediary services as wholesalers
With this role, they purchase the products in bulk and then resell it to customers at a price a bit more expensive compared to how much they purchased them from the manufacturer. Unlike agents and brokers, they work around a bigger budget due to the quantity they buy from suppliers.
3. Intermediary services as distributors
Distributors are like wholesalers except they seem to own the product or act as its franchise holder. They are sole distributors for products or manufacturers they are tied up to. For new products, they usually set a launching date as part of their marketing strategy to make the product more desirable to consumers.
4. Intermediary services as retailers
Unlike agents/brokers who look for stores/merchants who are willing to sell the product, retailers sell the product themselves directly to the consumers. Profit is more direct this way, but the work involved could be heavier since they will also be in charge of marketing and other additional tasks agents/brokers no longer do.
Biggest Advantage of Intermediary Services
In our sourcing and intermediary company, we perform different types of qualified intermediary except for being a retailer. Our qualified intermediary may also include but are not limited to doing paper works, checking legalities, handling customs and a lot more.
The biggest catch why our clients choose to go with our intermediary services is because they are able to save money through our help. We have better-negotiating power in dealing with suppliers since we are more connected to them compared to the relationship between customer and manufacturers.
Finding the Best Logistics Solution
The main goal of logistics management is to make sure everything is done right from the top of the operations all the way down to its customers at the right place, time and conditions. It is understandable that errors and problems could be encountered in any operations but with integrated logistics in place, these issues can be avoided and there are always contingency or fallback plans when worse comes to worst.
Advantages of Logistics Management
Logistics management has always been a critical part of supply management and manufacturing companies’ concerns. They know and understand how supply chain logistics help them meet or even exceed customer expectations.
As a competent sourcing company, we help our client do logistics management so that they can fully enjoy the advantages of such process. Logistics management can have a huge impact on your business and just in time manufacturing is the big target. Here are a few advantages you need to know of.
1. Reduced overhead costs
Part of logistics management is to create partnerships with suppliers, manufacturers and even couriers that you need to work within a supply chain management business. With partnerships, you can get the best deal out of their services instead of working out of a generic business relationship.
2. Faster delivery time
Aside from looking for the best price to service ratio, you need to also make sure that your products get delivered on time and this factor gets covered by logistics management. In our experience in logistics management, we overlook the entire shipping process from the manufacturing process until the products are shipped to our client’s warehouses.
Delivery time should never be an issue and our logistics team make sure our clients experience the best and fastest delivery process. Better efficiency and reduced costs are the results of excellent logistics management along with understanding the process on a system theory level.
Keep in mind that this process requires strategic planning and you cannot just dive into the process without knowing the things you want to achieve or improve.
Planning the Future: Demand Forecasting
Demand planning and forecasting is a vital process anticipating the demand for a product or service based on uncontrolled variables such as competition. Product demand forecasting is always targeted towards future time periods such as next month, within a year or for the next ten years.
The Effect of Demand Planning and Forecasting
A lot of businesses hugely rely on demand planning and forecasting for their operations. They look at all these forecasting reports to lessen the risks they take out of their decisions. There are also demand forecasting tools such as statistics, software, and apps they can use for a more accurate demand planning and forecasting. There are even some companies who assemble teams who work exclusively on this particular task aside from their regular employees.
In our company, we provide demand planning and forecasting services for our clients in support of the products they launch and continue to manufacture. We make sure the objectives are modified according to the outcome of our demand planning and forecasting.
For example, if our client is planning to manufacture 100,000 units of their latest product but the forecast suggests demand is low for the product. We will ask our client to modify the numbers and only manufacture 30,000 to 50,000 units to avoid potential loss. This is the part where the marketing department will do their magic and promote the product to further increase the demand later.