Explain what is meant by uncertainty in demand forecasting.
The barbecue sauce focal firm described in section 2.3 has manufacturing facilities in the Netherlands which are described as ‘high on quality and reliability, but low on responsiveness’. In order to maximize production efficiency, large batches of each flavour are made so that process cleanouts (each lasting four hours) are kept to a minimum. After manufacturing, each batch of a given flavour is transported to an off-site finishing operation, where bottles of the different flavours are packed into a display box for attractive presentation to the end-customer at the firm’s retail customers. This process takes an average of two weeks because of the need to ensure that all flavours are available. Finally, the display boxes are distributed through warehousing operations which have been situated in six carefully selected locations around the product’s major European market in Germany.
Management of the focal firm is under pressure to reduce inventories and stock write-offs (the sauce has a shelf life of three months). Propose what actions could be taken to improve the supply chain to permit improved responsiveness to end customer demand.