UNDERSTANDING FORECAST VARIABILITY IN CONTRACT ELECTRONICS MANUFACTURING

In the past few years, the electronics industry has undergone an explosion in new products and technologies. This fierce global competition has resulted in the decision by many companies to outsource manufacturing in order to concentrate on research and development, marketing, and sales. This has given rise to a number of companies who solely provide electronics manufacturing services. Exchange of information between product developers and contract manufacturers, especially information about product demand, is critical to the success of this business model. In this paper, we analyze forecast data obtained from a local contract manufacturer in order to better understand forecast variability and its reasons. We find that forecast variability tends to increase as the production period approaches, despite common belief that forecasts get better with time. We also discuss the impact that chronic material unavailability and product mix have on forecast variability. Finally, we see that unmet demand pushed in the next production period can distort forecasts and result in unrealistic expectations.