Nobody can predict the future, at least not to the degree original equipment manufacturers (OEMs) would prefer. Despite all the technological advancements in gathering pertinent data for use at the OEMs discretion, the sheer volume of this information can obscure the goals in collecting it in the first place: to create actionable business intelligence to reduce lead times, cut costs and optimize processes overall.

Fortunately, vendor managed inventory (VMI) services can help OEMs address challenges inherent in forecasting demand.

"Small forecasting windows can also lead to waste cropping up on the supply side."

Seasonal demand changes require granular oversight
Many manufacturers see changes to customer demand during different times of the year, which means these discrepancies will ostensibly repeat in their supply volumes. As seasonal levels of demand oscillate annually, the potential for over- and underproduction can increase if OEMs don't keep a close eye on their data. According to a study published in the Massachusetts Institute of Technology's Forum for Supply Chain Innovation, certain manufacturers may not have a forecasting window wide enough to anticipate upcoming changes to demand and make adjustments to production accordingly.

Small forecasting windows can also lead to waste cropping up on the supply side. If OEMs don't adequately leverage demand information to direct their supply orders, they could be spending too much money on things like class C components that will just crowd their warehouses. They could also spend too little and miss crucial production benchmarks. Whether snow falls or sun shines, vendor managed inventory services have the potential to keep manufacturers balanced on both ends. By overseeing usage and demand information in minute detail, VMI programs can initiate calibrations to supply as soon as possible to prevent waste and encourage lean, consistent production.

Forecasting class C components as a cost
For OEMS, the little details matter most. Even when manufacturers order class C components like fasteners in large volumes, sometimes the transactional logistics of ordering, delivering and accounting for these resources can exceed the cost of the physical items themselves, including forecasting. That said, many OEMs don't have the framework in place to supervise and facilitate the acquisition of these parts, which leaves the possibility of waste ever present.

VMI programs can correct these discrepancies by implementing best practices when it comes to working with suppliers. VMI programs specialize in optimizing the influx of supplies like class C components so warehouses complement a manufacturer's production rate, not complicate it. Because VMI programs can competently anticipate the needs of both the manufacturer and supplier, these services can stop either from getting stuck in a logistical lurch, adding to operational costs.