It's a familiar scenario. Orders spike and manufacturing can't keep up. The people on the manufacturing floor blame purchasing for the production line shutting down because purchasing didn't buy enough materials and logistics didn't get the materials to the plant in time. Purchasing and logistics look at the sales organization and say they did not get any forecasting information to predict a big spike in demand so inventories could be built to cover the demand.

If this sounds familiar, you are not alone. Demand variability is an issue for almost any industry and may be getting worse in a slow economy where more frequent promotions and discounts cause demand to spike more dramatically. Robert Murray of REM Associates (Princeton, N.J.) says many companies—in more industries than just consumer packaged goods and retail—have seasonal and unplanned changes in demand. For example, asphalt is a very seasonal material and its demand changes based on geography, time of year and weather patterns. These swings can greatly affect purchasing as well as inbound logistics plans.

"A lot of companies may even have shut-downs during certain times of the year," says Murray. "Those companies may have a manufacturing spike to increase inventory and accommodate that plant shutdown. That happens in any industry. If you have a two-week shutdown in the summer for vacation or maintenance, you have to cover sales while the plant is down."

Sharing demand forecasts with the logistics organization may not be the highest priority in most organizations, but it is an idea that is getting some attention from forward-thinking organizations. Denver-based software and consulting firm J.D. Edwards says a broader section of the organization is using its Demand Consensus product today than in the past, including more logistics planners.

Andrew Carlson, director of supply chain management at J.D. Edwards, says there is a blind spot outside the typical organization when it comes to demand planning for inbound materials, and new tools like Demand Consensus need to be implemented and deployed beyond the sales organization to eliminate that blind spot.

"Often, the logistics people are working completely blind and have no idea what's coming next," says Carlson. "[With new visibility tools] they can access the sourcing plan and get the changes each month and the minute the demand collaboration cycle detects a problem, that logistics professional will be alerted to the need to react. They can decide to call the bluff or move production earlier to level the inbound supply picture."

"A buyer or inbound logistics planner is not looking at demand for end products, but reviewing demand for the item he buys or ships. And he will say, 'Based on the demand profile you are proposing, I have never seen buying behavior like that before. I think something is wrong, so we can collaborate and reconcile that and reach consensus on it.'"

While most organizations are not far along enough in their processes to deploy these advanced tools (just getting logistics people physically into the right meetings is an oft-cited hurdle), the rise of initiatives like collaborative planning, forecasting and replenishment (CPFR) are proving the benefits of sharing data between sales and supply organizations. J.D. Edwards sees a lot of interest in CPFR with companies beginning to deploy multi-enterprise processes. But Carlson says there is still a big question as to whether that will be a widespread deployment or if users will keep "kicking the tires forever."

The electronics contract manufacturer has a unique perspective on the supply and demand picture. Its production is often dictated by the demand of its customer's customers, which makes it even more difficult to forecast because it is a layer removed. But sometimes the most effective change is to build on the processes currently in place.

Jim Molzon, vice president of supply chain and logistics at Solectron (Milpitas, Calif.), says his company uses an advanced purchase order system to forecast inbound logistics demand in the short term. Solectron uses an e-logistics tool from Arzoon (San Mateo, Calif.) that is integrated with its supply base. When a supplier puts the purchase order number into the system, the inbound logistics organization is immediately aware of the PO and when it needs to ship.

"Our leadtimes are usually fairly long, so we can get good visibility that way and plan the freight at the tail end of that leadtime," Molzon says. "By monitoring the number of purchase orders we place, we can predict how much supply we'll need to bring in each week." Molzon says with the increased visibility into shipments in this system, Solectron will not only be able to plan logistics capacity, but also optimize and consolidate loads more efficiently.

"We balance the risk of peaks and valleys by ensuring we have a carrier base that is broad enough to cover those changes," says Molzon. "We don't have any single-carrier relationships that may leave us out of luck [when a demand spike hits]."

Supply chain software maker Manugistics (Rockville, Md.) says its clients are beginning to view supply chain solutions more as cycles instead of collections of separate solutions for each part of the chain. Chris Kohni, manager of solution strategy at Manugistics, says it is vital for inbound logistics planners to not only have access to sales forecast data, but also any promotional or marketing plans that may cause dramatic increases in sales and production.

As an example, Kohni cited a current Manugistics client in the consumer products industry that sees major demand spikes in the summer months and uses the forecasting tools in the Manugistics solution to plan and source its inbound freight in anticipation of that demand spike. And by having sourcing and logistics all viewing the same data, the inbound managers can begin to plan lanes the moment the final sourcing decisions are made with a better chance to optimize the freight by tying lanes together.

Todd Inlander, chief information officer at Fleetwood Enterprises (Riverside, Calif.), a maker of recreational vehicles and modular homes, agrees with Kohni's evaluation. Inlander says using Excel spreadsheets to share forecast data between departments is simply not practical. Fleetwood is currently testing out a demand planning tool from J.D. Edwards.

"Right now [the J.D. Edwards tool] is just doing sales forecasting in our motor home division," Inlander says. "But once we move it from sales forecasting to operations forecasting, we will have more detailed sales and operations planning meetings with people in purchasing and materials to talk about the sales forecast and the relationship to planned supplies and capacity. So then everyone who is affected by the demand can react accordingly."

Fleetwood tends to plan for its busy spring season by ramping up manufacturing and creating an inventory build-up. By using more detailed forecasting, manufacturing will know not only how much, but which specific products should be built for inventory, and therefore what materials and amounts need to be sourced and shipped to fill that anticipated demand.