Collateral:JDA Demand Management White Paper

Brief Overview

Benefits attained by reducing error stemming from over-forecasting include:

• Reduction in costs stemming from discounting/markdown: Inventory that is over-forecasted is often discounted to move through the supply chain. These costs can apply to retailers, wholesalers and manufacturers.

• Reduced trans-shipment costs: When inventory is overforecasted at a store, warehouse or plant location, it often must be trans-shipped to another location to balance the period supply or avoid obsolescence.

• Reduced obsolescence costs: Inventory becomes obsolete for a number of reasons including dating issues, replacement packaging, technology innovation and fashion trends. Often, companies must absorb significant costs to dispose of inventory that is no longer saleable within the market.

• Reduced inventory holding costs: Over-forecasting often creates excess inventory. This excess inventory carries significant financial costs. Companies absorb interest rate costs (or opportunity costs of capital) in inventory that is produced but not consumed by demand or leveraged for statistical safety stock.

• Reduced warehouse costs: Companies that consistently overforecast are often paying higher warehousing fees and fees associated with third party storage. Companies that forecast more accurately can postpone facility costs even as they grow the business.