The risk reducing effect of forecasting in supply chains

In order to realise just-in-time concepts in supply chains, customers usually have to provide information about their required materials to their suppliers. Now the problem arises what forecast data the customer should report to his suppliers when the future demand of his outlet is not exactly known. This demand usually is subject to a probability distribution. Without any restrictions, the customer will always report those forecast data that correspond to the possible maximum demand of his outlet in order to keep flexibility. This information will not be useful to the supplier. Therefore, the customer usually is engaged to purchase, within certain limitation periods, that quantity of parts he reported. Otherwise he has to do an adjustment payment. This paper analyses what forecast data the customer should report, which amount the supplier should take into consideration in light of the customer´s intentions and what release order quantity the customer should realise having previously reported the forecast data.