How Better Forecasting Practices Improve Supply Chain Relationships

Few things are more frustrating for an electrical distributor than not receiving the products and materials when they need them.

We’ve been pretty quick to point out that the supply chain has been somewhat unpredictable lately. But with the pandemic stretching for more than two years, the excuse is starting to run its course. The industry has found several ways to innovate and introduce new supply chain technology into the fold, but the process is still unstable.

Some problems in the manufacturing industry are tied to ongoing pandemic recovery; others are associated with cyclical and seasonal runs on certain products currently in high demand.

Whatever the case, there are ways for manufacturers and distributors to work together by opening communication lines, reducing bottlenecks, and being transparent enough to share information with one another.

One way to accomplish this is with better product forecasting. This makes it easier to plan for busy times, ensure products are available, and get materials into end users’ hands as quickly as possible.

What is Supply Chain Forecasting?

Supply chain forecasting is a process many companies use to control the production and flow of raw materials, components, and finished goods used or sold regularly.

Electrical distributors typically keep a certain amount of stock on hand because it’s impossible to know when a customer will come in looking for a specific item. Other products are popular year-round, so stocking them is a no-brainer.

What they don’t do is keep an endless supply of stock on hand because that would be terrible for the bottom line. This is where forecasting methods come in, keeping a steady supply of wire in stock without running the risk of carrying too much or too little at any given time.

Sales forecasting accounts for previous sales and historical data, product seasonality, and even general availability to ensure existing products are available for future sales without delays.

The great thing about forecasting is that when done correctly, it positively impacts both manufacturers and distributors. Electrical distributors need to have products, but they can’t risk spending cash and using up inventory space to stock products they don’t need at the moment.

Manufacturers, for their part, use demand forecasting to stay ahead of the curve, ensuring they don’t produce too little or too much. This reduces the risk of failing to fill orders, leaving their distributors scrambling or making too much, and sitting on dead weight for several months.

How Can Distributors and Manufacturers Improve Forecasting Accuracy?

Follow the Seasons

You wouldn’t wear a raincoat on a sunny day, so why would you need 4,000 feet of direct burial tracer wire when the entire state is buried under three feet of snow?

Seasonality impacts forecasting because it helps create a moving average that distributors and manufacturers can easily follow. Construction is active in all 50 states during the summer, making products like tracer wire big sellers for many types of underground projects. That same demand for tracer wire cools off during the late fall, winter, and early spring in northern states because most underground projects are on hold.

By keeping an eye on seasonality, manufacturers can better understand production planning and minimize lead times for items their distributors and end users need the most.

Keep an Eye on Purchasing Trends

Are customers asking more about one type of wire compared to others? Is a previously hot item losing steam? It’s clues like these that manufacturer forecasting can use to quickly pivot from one to another.

Customer demands are constantly changing, so the more you know about your customers’ needs, the easier it is to maintain appropriate stock and avoid unnecessary costs. Just remember, pivoting to manufacture or purchase other items costs space, time, and/or money.

Communication is Key

Supply chain plans help everyone get on the same page, understand their roles, and figure out what they need to do to maintain and build trust.

ERP systems can simplify supply chain management by keeping tabs on everything and telling distributors when orders should be placed. For manufacturing businesses, ERP systems streamline the manufacturing planning process to avoid supply chain hiccups, SLA issues, and other delays that could impact trust.

Long story short, being transparent and keeping communication lines open does a lot to build trust, improve relationships, and reduce potential bottlenecks from gumming up the works.

Keep Thinking Ahead

We’ve seen firsthand how little it takes to throw the entire supply chain out of alignment.

As the supply chain evolves and becomes more resilient, forecasting provides a safety net that keeps distributors one step ahead of potential pitfalls.

Knowing what items to order at what time makes it all the easier for distributors to pivot if problems occur. Producers, meanwhile, can avoid manufacturing delays, allowing them to work with their customers to find solutions and keep shipments moving.

Better Communication, Better Supply Chain

If you don’t have an open line of communication with your manufacturers and suppliers, you’re not on the same page.

This isn’t to say there should be hourly emails asking for status updates. However, if electrical distributors and manufacturers build rapport and trust, they can work together to keep operations running smoothly.

For distributors, better communication means:

• Less stock = less warehouse space. Let’s be honest; warehouse space is expensive, so every square foot needs to be optimized. With less dead stock hanging around gathering dust, distributors can spend less money holding inventory and use that capital to innovate.
• Better labor and product planning. When you know what you need, you can plan appropriately and work with manufacturers to avoid costly delays. Communication also helps you scale when you have to meet higher demand at points throughout the year.
• Making better decisions. When you have detailed sales information tied to every product in the warehouse, it takes all the guesswork out of determining what products will become popular at what time. The data is all right there, easy to track, and paints the entire picture using historical information.
• Stronger ROIs. Order what you need, when you need it. Maintain a lean inventory that boosts sales and minimizes cash invested in less optimal products.

For manufacturers, better communication means:

• Spending less time producing low-selling products. Labor shortages mean every hour worked has to be tied to something generating positive returns. Focusing on products that sell well and are needed quickly minimizes time spent making less wanted items.
• More opportunities to meet needs as they arise by setting clear expectations. SLAs are a necessary part of the manufacturing process. If they’re clearly spelled out and agreed to, manufacturers must be accountable for upholding their end of the bargain.
• A rotating stock of fresh inventory. Nobody wants to sit on stock they can’t sell. Better communication means manufacturers spend more time focusing on items that can ship quickly and free up space in the warehouse.
• Building stronger partner relationships through mutual trust. This is the most critical aspect of good communication. If manufacturers and distributors are on the same page and supporting each other, both sides win. Distributors get what they want, and manufacturers can quickly move finished goods so they don’t sit on a warehouse shelf.

Forecast Today to Succeed Tomorrow

When every dollar counts, putting the pieces in place to build a robust forecasting system will go a long way toward producing better results and reducing costly mistakes.

With the right partner, system, and processes in place, inventory tracking, supply chain management, and relationship building become second nature. Once that happens, both manufacturers and their distributor partners can thrive.