Forecast Errors
Volume 2, Issue 3, January 19, 2015

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Inhibited Growth Reports TerraTrike

In MiBiz (Michigan Business), John Wiegand recently profiled TerraTrike, a firm which designs and markets recumbent tricycles. The company doubled its sales since 2012, generating between $5 million and $6 million in 2014, which is expected to be a record year for the company. To mitigate supply-side pressures, TerraTrike opened a warehouse near its production facility to better be able to meet customer demand. Kentwood-based TerraTrike learned all too well the pitfalls a business can face when its sales projections fall short of anticipating the actual demand from consumers for its products. CEO Mike Kessenich share that growth spurt brought on new problems for the company with capacity and supply chain issues that have effectively inhibited how fast it can grow. The company recently acquired 3,000 square feet of warehouse space in Taiwan next to its manufacturing facility to ease its supply-side bottlenecks. Instead of operating hand-to-mouth with each container of product, TerraTrike will cut lead times from four months to the 30 days it takes to ship the products. The company also stretched its inventory forecasting two to three years out to avoid any future component shortages. Read here.

Forecast Errors
Volume 2, Issue 2, January 12, 2015

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Examined via Backorders

One of the top customer inquiries and complaints is the status of a backorder, which costs customer service time, it also costs to ship the product once it arrives in the distribution center. With the average cost priced at $13 per backordered unit of merchandise, very quickly those expensive additional costs impact the bottom line.  F. Curtis Barry & Company, a national consulting firm for catalog, e-commerce, and retail businesses, suggests analyzing backorders to improve the accuracy of inventory forecasting. Jeffrey Barry also suggest that the customer order fill rate should be reviewed and improved without being out of stock or overstocked and gave an example of backorder costs: A typical catalog with a 20% backorder rate averaging two items per order processed 200,000 orders for a total of 400,000 units of merchandise. Calculated at 20%, 40,000 customer orders had backorders. Estimating backorder cost on the low end at $7.37 per order, the catalog will have to absorb $294,800 to make up for backorders. See more in our whitepaper.

Forecast Errors
Volume 2, Issue 1, January 6, 2015

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Rarely Solved by S&OP

Few sales and operations planning modules offer more exception-based planning, enabling organizations to focus on the product areas where they can realize the greatest return and eliminate forecasting errors.  There are idiosyncrasies that require industry-specific functionality to plan and execute supply chain strategies faster and more effectively for achieving business growth. Visualization of complex business data at a glance, would allow users can quickly read, predict and react to information, make faster, more proactive business decisions, and achieve strategic objectives that maximize profit. “Business intelligence is a tool set that continues to evolve from backwards looking to predictive and proactive,” said Steve Banker, service director for supply chain management at ARC Advisory Group. “The greater the visibility into the supply chain, the easier it is for a company to make course corrections toward business success.” View video here.

Forecast Errors
Volume I, Issue 5, December 15, 2014

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Eliminated with Sourcing Roadmap  

Being armed with clean and accurate data regarding suppliers, costs, risks and other important criteria, is absolutely crucial as a first step in understanding where to focus sourcing efforts. Developing a sourcing roadmap that generates the greatest results requires additional analysis of organizational goals, market conditions, and spending patterns.  Correcting forecasting errors requires implementation of best practices for collecting and classifying spend and supplier data for effective spend analysis, how to use this analysis to build a long term sourcing strategy and sourcing roadmap, and how to identify an organization's data that can be most helpful in making sourcing decisions.  View video here.

Forecast Errors
Volume I, Issue 4, December 8, 2014

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Reduced by Loops Not MRP

Loops not MRP create a result which is a unique architecture that treats material flow as a series of interconnected loops instead of the MRP architecture of linear process. MRP starts with the finished goods planned demand and then extracts the bill of materials and sends schedules both to the plants and its suppliers. Any change in demand causes supplier to react which has an impact on the upstream value chain. Loops are independent, yet interconnected with each other. One loop is between the supplier and warehouse. This may have a long lead time and lot size can be in pallets. The next loop could be between the warehouse and supermarket locations in the plant.  The lead time could be one day and lot size could be boxes. The next loop may be between supermarket and assembly lines. The lead time could be hours and the lot size could be in small bin quantities. Read more here.

Forecast Errors
Volume I, Issue 3, December 1, 2014

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Must Be Eliminated According to Gartner

Ben YoKell reported in Supply Chain Management Review in the current environment of proliferating product portfolios and increasing demand volatility, there is a great deal riding on getting demand planning right. Inaccuracies in demand forecasts generate costly waves felt throughout the entire supply chain. As such, Gartner recently positioned forecast accuracy at the very top of its metrics hierarchy.  Regular analysis of detailed transactional data from many enterprises combined with process information on exactly how demand planning is performed within the enterprise(s) is needed. Individualized results from new analytical approaches have created previously unavailable insights. Read more here.

Forecast Errors
Volume I, Issue 2, November 24, 2014

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.

Forecast Errors Due to Significant Shifts in Demand Patterns 

John Kamal, vice president of supply chain solutions, Triple Point Technology wrote in Supply & Demand Chain Executive magazine the demand volatility has become a major focus area for supply chain managers at large process manufacturers. While businesses have been experiencing significant shifts in demand patterns, the supply of feedstock and other key materials have become notoriously volatile in the same period. Volatile demand and volatile supply are intimately linked in a circular causal relationship. But geo-politics, globalization and depressed economic trajectories in developed markets have all contributed to the problem.  The traditional model of comparatively stable supply and demand, with tolerable amounts of unpredictability, has been overturned with greater variability on both sides of the supply chain. Securing profitability has become more challenging and addressing the lack of clarity in the demand picture is now more challenging than ever. Read more here.

Forecast Errors

Volume I, Issue 1, November 17, 2014

A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.