Many organizations are moving to a collaborative process with their major custom

Question

Many organizations are moving to a collaborative process with their major customers to get their input on planning inventory levels and production rather than relying on an internally generated demand forecast.   Explain how such a process might work. What issues and concerns might a customer have in entering into an arrangement to do that?  

Many organizations are moving to a collaborative process with their major customers to get their input on planning inventory levels and production rather than relying on an internally generated demand forecast.   Explain how such a process might work. What issues and concerns might a customer have in entering into an arrangement to do that?  

Explanation / Answer

Firms have been getting real-time information from the customers to increase the forecast accuracy of the demand by ensuring they are configured in their ERP systems to post transactions as sales orders and create forecasts based on the demand data from them in the systems. This provides higher accuracy of the quantity of the inventory to be stocked at the warehouses to fulfill the customer demand thus avoiding overstocking and the inventory holding costs resulting from the same.

The customers systems can be interfaced to the firm's ERP systems for transfer of the demand and order information to the firm. This ensures the transfer of data as and when it is avaiable thus ensuring real-time estimates of the forecast.

The issues or concerns that the custoemr might have in entering into an arrangement with the firm include -

1. Data security issues as they might be skeptical in the firm's use of data.

2. Increased control of the customers by the firm.

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