Improving demand forecasting process for t company in southern Vietnam

Abstract

T Company, under T Corporation, is a medical device company that delivers high-quality products and solutions that help solve various medical issues in Vietnam, including Stents - a strategic product line. Recently, T Company has experienced low sales performance of stents in Southern Vietnam, leading to not achieving the Stent sales target. K Distributor is the Southern distributor in charge of bidding and selling stents in the South. Three potential problems might lead to this situation: Ineffective sales bidding, Ineffective promotional activities, and Product shortage. Through in-depth interviews, practical data, and literature, Product shortage is the main problem, which cannot fully meet customer needs, leading to "Not achieving the Stent sales target in the South". Product shortage negatively impacts the company's profitability by causing a loss of sales. This problem might reduce market share, customer satisfaction, and brand reputation and even lead to the loss of upcoming sales opportunities, which further affect the financial performance in the future. This thesis combines interviews with relevant stakeholders and literature to explore potential causes. Three possible causes leading to product shortage include Supply disruption, Lack of technology implementation, and Inadequate demand forecasting process. Data collected from the company, market comparison, and in-depth interviews were analyzed to investigate and validate the root cause, which is Inadequate demand forecasting process. Demand forecasting accuracy belongs to demand planning as one of the vital ingredients in sales and operations planning, impacting operational efficiency through effectively making decisions, inventory management, and supply chain planning. An inadequate demand forecasting process impacts the accuracy of demand forecast data and might lead to stock-outs or missing out on sales opportunities, directly affecting the company’s sales performance. This thesis proposed two alternative solutions: a “Step-by-step standardizing demand forecasting process” and “Implementing a new AI-based demand planning system”. Cost and benefits analysis was applied to evaluate two solutions. After analyzing and also getting opinions from key stakeholders, solution #1, the “Step-by-step standardizing demand forecasting process”, is the most appropriate solution, which meets all design requirements, including effectiveness, efficiency, timeline and cost. This thesis designed the action plan to implement solution #1 in FY24, starting from quarter 2. Through this solution and action plan, T company can standardize the demand forecasting process with an SOP and set a standard for communication channels with distributors, thereby improving demand forecasting accuracy. This solution can expand mid-term by renewing the T company's and distributors' distribution agreement to ensure the two parties' commitment to improving demand forecasting. Eventually, this will lead to avoiding product shortages to ensure high sales performance.