Image by JDA, Inc.

Flowcasting is the estimation of future demand using data about the flow of products through your supply chain, to your customer and through their network to the shelf and checkout.  Ostensibly, flowcasting gives you a fresher picture of demand than traditional forecasting, which mostly uses historical demand patterns and demand spike estimates for upcoming marketing and promotional events.

Flowcasting requires accurate data from several points in the supply chain (yours and that of your trading partners), from the shelf backwards. The data has to be summarized in the same time sequencing as your physical supply chain in order to see cause-effect relationships, and it has to be “normalized” so that data points collected from your customer’s system have the same nomenclature as those in your systems.

As you might suspect, choreographing the successful flowcasting system is no small effort.

Nonetheless, software vendors are beginning to market “flowcasting” solutions.  This description from JDA for its product is a good summary of what flowcasting applications are at least intended to do:

“JDA Flowcasting enables channel-wide joint planning and collaboration between manufacturer and retailer based on sell-through forecast, promotions and supply chain planning parameters. This solution delivers visibility and enables analytics directly from the shelf, tying in replenishment and time-phased order collaboration with key trading partner participants. Enhanced collaborative planning drives improved profitability, productivity and control.”

In simple terms, software for flowcasting tees up all the downstream analytics from your supply chain and integrates it with your supply chain planning systems for smarter sourcing, production, and distribution decisions.

Should you invest in these applications?  I think some firms will see more benefits than others:

• Firms that have strong collaborative selling plans with their trading partners stand to benefit from the “one version of the truth” that can come from both retailer and suppliers being on the same flowcasting platform;
• Companies with fast-moving supply chains and relatively short production and delivery lead times may gain benefits from the ability to act on the near-real time consumption data.  For example, production plans and inventory settings for new products can be adjusted for items that are selling through the supply chain faster than predicted;
• Organizations that have more experience with supply chain planning applications and more expertise internally with data-driven supply chain management will have a shorter learning curve with flowcasting.
• IT departments that have full control over their ERP or other systems of record and can competently integrate supply chain planning applications will also benefit sooner and at less expense.  It is from within an enterprise’s ERP system that, among other sources of data, successful flowcasting will need to extract and use accurate inventory, on-hand order, and pricing data including scheduled promotional discounts.

Consultants Andre Martin and Mike Doherty have written a book about flowcasting.

Inside a Red Wing shoe factory.  Photo by Nina Hale, cc license.

The supply chain – a term used to describe all the activities needed to bring goods to market, is a natural beneficiary of a good ERP system because the supply chain extends from one end of an enterprise to another. Often the individual parts of a supply chain run on their own systems – a system for raw materials, another for planning finished goods production and deployment, and so on. It’s possible to have three or four separate systems running different parts of the supply chain. With an ERP system, all parts of the supply chain are connected to one another.

All of the costs and activities associated with each part of the supply chain are in one place, and they are mutually dependent on one another as either inputs or outputs. It is at least theoretically the logical software equivalent of the connected enterprise. And if the enterprise is truly connected and coordinated, then theoretically there is never any wasted inventory, lost sales, out of stocks, overproduction, late deliveries, etc.

A good ERP system will coordinate the supply chain like this:

• It will have a sales forecasting module that allows users to source historical sales data and model it to derive projected sales;
• The projected demand, by day, week, and month, will automatically determine quantities of raw materials needed, where, and when;
• The required materials will automatically be converted to purchase orders for those raw materials;
• The projected demand will determine a production schedule by plant and a schedule of where the finished goods are to be shipped;
• Sales orders are received, checked, confirmed, and sent to the warehouse or distribution center for shipment;
• Sales orders will “consume” a sales forecast so that managers can track shipments against projected sales;
• Sales orders will be routed for delivery via the most efficient method of transportation and transportation providers will be confirmed and scheduled;
• Inventory will be shipped to distribution centers according to the geographic demand of product;
• Distribution centers will receive sales orders for shipment, and shipments to customers will recorded, posted to financials, and used to generate an invoice;
• Warehousing and transportation costs will be posted back to the financial system and the corresponding accounts payable will be created.

For more on this topic, Gartner has some interesting research here.