One of the main factors that are generating a need to manufacturing based on forecast is the reducing lead times acceptable to the customers. Since the customers are not willing to wait for their requirements the manufacturers are driven to anticipate the demand and manufacture based on that. The manufacturer wants to be ready to sell "off the shelf" when a customer demands it. This would lead to reduced lost orders.

Most companies forecast future demand based on historical customer orders or shipment levels and patterns. However, actual consumer demand may be very different from the order stream. Each member of the supply chain observes the demand patterns of its customers and in turn produces as set of demands on its suppliers. In order to be more accurate the enterprise looks at collaborative demand forecasting. By providing business partner visibility into inventory and by collaborating on a single shared forecast of customer demand, supply chain partners can positively impact a set of key business drivers to create value across supply chain partners.

The manufacturer tries to preempt the requirements of the customer and then manufactures the goods based on this forecasted demand. He would keep the material in stock either in the manufacturing plant or to his distribution centers in the supply chain. The manufacturers approach would be to keep the goods closest to the place at which he is more certain about the demand and also reduce the time to deliver to customer.

The primary benefit of this process is in a situation when the customer has various options of getting the product. In case a customer sees that there is a delay in getting material from one supplier he immediately goes to another supplier. With this process the manufacturer will keep the material ready and satisfy the customer demand immediately. This would lead to reduced lost orders and order lead times.