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Electronics Executives Acknowledge Product Forecasts' Difficulties, Shift to Reducing Risk from Inaccurate Forecasts
August 28, 2003 |Estimated reading time: 2 minutes
Alameda, Calif. — Having grossly over-forecasted product demand in 2000-2001 and disputing with suppliers about excess inventories, executives at electronic product companies are coupling their efforts to sharpen forecasting practices with tactics to mitigate the impact and risk of inaccurate forecasts.
For outsource-consulting firm Technology Forecasters Inc. (TFI)'s new study "Best Practices in Product Forecasting," TFI conducted in-depth interviews with executives at leading electronics companies regarding best practices for product forecasting — particularly when outsourcing manufacturing. The study's insights, along with recommended forecasting strategies both for the product companies and their manufacturing outsourcing partners will be presented on September 9 at TFI's Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain in Monterrey, Mexico.
This study's manager is TFI Senior Consultant Niti Agrawal, who in 1997 while leading Hewlett-Packard's team responsible for a $400 million PC server product line received HP's Network Server Division award for Forecast Accuracy. Twenty-eight percent of the managers TFI interviewed noted that increasing forecast accuracy is of high importance to them. However, a larger percentage — 55 percent — indicated that reducing product lead times and synchronizing demand signals to supply-side activities is of high importance to their business results.
Leading electronic product companies use three dominant product-level forecasting methodologies: Bottom Up, Middle Out and Top Down. The choice of methodologies often determines which team owns the forecast and which teams validate it. Of the product companies TFI interviewed, 55 percent used a Bottom Up approach, 27 percent used a Middle Out approach, and 18 percent used a Top Down approach, but in all approaches the forecast is validated with other groups or data sources. Management at leading high-technology companies understand that product-level forecasting is a cross-functional process that can be managed by one team, but must involve multiple internal departments and partners.
The September 9 Quarterly Forum will be held at Elcoteq Network Corp.'s Monterrey, Mexico, facility. Elcoteq — a Corporate Sponsor of the Quarterly Forum and the world's seventh largest electronics manufacturing services provider — specializes in design, manufacturing, new product introduction and after-sales service of communications technology products. The keynote presentation, "Manufacturing Communications Equipment in Mexico, Comparisons with China," will be delivered by Elcoteq's President of the Americas Douglas Brenner.Also at the Quarterly Forum will be a panel discussion entitled "The Changing Landscape for Manufacturing in Mexico," comprising Mexican government, association and business leaders; "The Contract Manufacturing Industry in Europe: Ascension of Eastern Europe and Roles of Multinational versus Indigenous Companies," by TFI Senior Consultant Charlie Wade; and "Growing Segments for Outsourcing in the Industrial Electronics Market," by TFI's Senior Analyst Narith Yos. "An Outsourcing Case Study" will be presented by TFI Senior Outsource Consultant Robert Wyckoff, who will interview executives from ATMI (a semiconductor equipment manufacturer) and Pemstar (contract manufacturer serving ATMI) about the outsourcing process led by TFI and a multifunctional team at ATMI.
A tour of Elcoteq's Monterrey Six Sigma facility and several networking events will provide Quarterly Forum members with further opportunities to explore and discuss various low-cost manufacturing options. In addition to Elcoteq, other corporate sponsors of the Quarterly Forum are Agile Software and the newest Corporate Sponsor Fabrinet — a contract manufacturer based in Thailand.
TFI is a strategic-consulting firm helping electronic-product executives to improve supply-chain, outsourcing, and environmental strategies for cost benefits. For more information, visit www.techforecasters.com.