How does demand forecasting differ between make-to-stock and make-to-order environments?

Make-to-stock, since the aim of this method is to provide available-to-promise products which have high fluctuating demand, therefore, it should have a consensus prediction first between Finance, Sales Marketing, and Operation through S&OP. Afterwards, Production Planning can be created by putting some considerations such as capacity constraints, available inventory, inventory management, available resources, lead time, materials requirements etc. Lastly, oversee and control the process, In my experience, there are two things to be controlled thoroughly, they are: 1. Production Plan VS achievement. 2. The conformity between the production plan, available stock, and order received.

Made to stock can also affect expiry date products, which could lead to high losses if demand decreases. Your demand can change or fluctuate. I agree with the above statement.

Typically the confirmed sales orders and sales pipeline are taken into account for demand plan in Make to order scenario. Since supply planning needs to reduce down the lead time, it triggers the opportunity for standardization of products.

I agree with the para, just wanted to add that supply planning is more dominating than demand planning for a MTO scenario. Once we have a demand forecast, everything depends on how our supply planning is aligned with it. Supply planning is all about aligning the alied materials and analysing the vendors and lead times regularly.

As a design engineer who has been designing bespoke products for a long time I have learned to ensure parts are standardised where possible. If you minimise the number of unique components you can keep a stock of more items and plan for the demand better. For instance utilise similar bearings, motors even if sometimes the parts may be overkill for a certain application the cost savings can be great through saved time and administration of extensive part libraries.

Make-to-order is often referred to as the pull strategy because the products are manufactured only after the customer's order has been received. In my opinion, relying solely on demand forecasting to manufacture products may not be the best approach. Instead, it would be more effective if we could obtain the demand from our customers first. We can then proceed to build buffer stock for any critical raw materials, which would enable us to shorten the lead time when our customers submit their orders.

A forecast is an inference of what is likely to happen in the future, forecasting is more of an art than a science (James B. Dilworth and Lawrence P.Ettkin; 1993), based on that, my perspective is by getting familiar with the products first will guide us to the outlook of customer behaviour and market share as the qualitative approach to get some inferences from some critical point of the quantitative approach. For instance, we found some spikes and falls in our achievement history of sales, by getting familiar with our products, we can infer the strengths and weaknesses of our product that affect the customer behaviour. Is it applicable to both MTO and MTS, or either? let's have it out.

Nowadays, a big VUCA (Volatility, Uncertainty, Complexity, Ambiguity) can be named TUNA (Turbulence, Uncertainty, Novelty, Ambiguity) is an immense challenge to Demand Forecasting. How to overcome it and get the desired outcome? from my standpoint, we should fight it astutely by continuously using another VUCA. Vision (assess the current situation and what is about to happen in the future). Understanding (get a crystal clear outlook of your product strengths and weaknesses, your market share, and your customer behaviour). Clarity (embrace the novelty as your Thor Hammer to break the ambiguity into pieces. In this context is the massive evolution of technology which has a big role in customer behaviour changes). Agility ( be adaptable ).

To add, a new term is in trend for the same and that is CPFR which is collaborative planning, forecasting and replenishment. This is self explanatory from the name itself that the consensus forecast is the output of the input of all the stakeholders. To refine the demand, collaboration is utterly important.

Demand planning is based on historical information. Your records must be accurate. If with lean manufacturing. It dictates what capacity you must have. Your systems become flexible to quick change overs the can effect quick turnaround time. Demand planning dictates holding stock requirements and EOQ planning. It's better to have demand and forecasting in place rather that mass production.