July/August 2019 - 28

Demand forecasting essential in supply-chain management
A supply chain is a
UNITED POTATO
GROWERS OF
AMERICA
Buzz Shahan
Chief Operating
Officer
system that includes
those activities,
people, entities,
information and
resources necessary
to get a desired
product from the
supplier to the final
customer. Some
examples of supply
chain activities
are those used by
most fresh potato
farmers and their packer/shippers to supply
a retailer or wholesaler with their potatoes,
and by retailers/wholesalers to receive and
merchandize those potatoes.
In making the fresh potato supply chain
function, which responsibilities lay with
the supplier, which lay with the retailer/
wholesaler, and how do the two differ?
One would assume that supply chain
management would be as logical and
straightforward as any other business
process. Such is the case from the retail/
wholesale side but not always from the fresh
potato grower/shipper side. Retail/wholesale
companies become involved in supply-chain
management primarily to maximize overall
profitability. They do this by controlling
product quality, tightening inventory levels
and honing freight/delivery costs.
Unlike those on the retail/wholesale side
whose supply chain involvement centers
on rate of returns, many on the grower/
shippers' side perform their supply side
tasks on a purely functional basis. Here
are functions that too many fresh potato
suppliers see as their supply chain duties:
* First, get the order by most any means,
possibly sacrificing price (grower equity)
to do it.
* Second, fulfill the order by generating
the requested packages, an obvious
functional prerequisite.
* Third, ship the order on time including
arranging transportation when required
to do so, another functional prerequisite.
A deeper dive into how the fresh potato
supply side addresses supply chain
decisions reveals that decisions are almost
always based on what is best for the
function, not on what is best for the basic
supplier - the grower. Think about what
this says about fresh potato supply chain
management overall. Think about a missing
responsibility that, if added to fresh potato
supply side duties, as happens in other
industries, would have the greatest impact
on grower profitability. What would that
responsibility be?
Because fresh potatoes are fresh
produce, and because fresh produce price
reacts most sensitively to the supply demand
balance, demand forecasting becomes
fundamental to all else that follows in supply
side supply chain management, certainly in
terms of boosting grower profitability.
Here's the anomaly: since grower
profitability is absolutely tied to accurate
demand forecasting, why does demand
forecasting not appear on the list of
responsibilities of many who perform fresh
potato supply chain functions? Happily,
demand forecasting does appear on the
list of supply side duties in certain potatoproducing
regions and growers in those
regions reap consistent and fair returns
because of it.
CONTINUED ON PAGE 29
28
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