Question

A lean manufacturing system basically removes all waste, including inventory, as much as possible. An ideal lean system is close to a make-to-order system. In such a system, all upstream activities are triggered by downstream action, originated by the customer demand, i.e., only when customer demand appears, will the system to start to make a product. For such a system, is forecasting still necessary? If it is, why and how to use the forecast?

Answer 1

Solution:

Even for made to order system, the forecasting remains one of the important aspects of supply chain management. The make to order system will start the production of the product after the customer has placed the order and thus the company should already have enough inventory of raw materials to ensure that they make to order system is successful by ensuring appropriate inventory of raw materials.

Forecasting can be used to understand the inventory of raw materials required at various points in time and season and thus stock the inventory accordingly to ensure the success of make to order system for any company. forecasting can also be used to estimate the demand for their product so that effective manpower and machinery is available to run the production of the product after the customer places an order. Thus, forecasting can be used for estimating various important metrics and values which will ensure that the make to order system has all the required ingredients and tools at its disposal.

Hence, the above stated are the reasons why it is necessary to use forecasting even in made to order systems.