Collaborative Forecasting and Its Impact on Supply Chain Performance

Abstract

In recent years, electronic data sharing has become an industry standard. Starting as a tool to cut costs through elimination of expensive paperwork and reduction in human errors, electronic data interchange (EDI) evolved during the last two decades into an enabler for the creation of new supply chain business models. For example, managers realized that by cutting lead times they can bring their products to the market faster and thus save much in inventory costs and at the same time reduce lost sales. This gave rise to important practices such as quick response (QR) (Hammond 1990, Frazier 1986) and Efficient Consumer Response (ECR) (Kurt Salomon Associates 1993). Visibility turned quickly into a popular word in the supply chain manager’s vocabulary: For example, by providing suppliers with access to inventory and Point-of-Sale (POS) data, companies such as Wal-Mart gained a substantial increase in the level of product availability due to the ability of their vendors to better plan and execute their logistics processes — hence, replacing costly inventory by information. In recent years, rapid evolution in electronic commerce and information technology has paved the way for the implementation of a variety of coordination mechanisms in supply chains, and in many cases it has provided the necessary means for supply chain partners to restructure the way they conduct business (Andersen Consulting 1998, Magretta 1998). Visibility through EDI is, for instance, at the backbone of advanced collaborative manufacturing and e-trade concepts (i2 TradeMatrix 2001).