Forecast Errors
Volume 2, Issue 11, March 16, 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.

CPG Demand Driven Supply Chain Reduce Forecast Errors 

The Grocery Manufacturers Association (GMA) and Food Marketing Institute (FMI) joined together as the Trading Partner Alliance (TPA) and hosted their annual Supply Chain Conference last month in Phoenix. Increasingly CPG companies quickly optimize supply chains with demand-driven cloud-based solutions. The Trading Partner Alliance (TPA) is a joint industry affairs/industry relations leadership group that was formed by GMA and FMI in January 2009. The TPA exists to develop a shared retailer-manufacturer agenda on supply chain efficiency issues, the application of information technology, the adoption of environmentally-friendly business practices, and other issues. Inventory velocity in the CPG environment is vital. Read more.

Forecast Errors
Volume 2, Issue 10, March 9, 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.

Emerson Reduces Forecast Errors with Collaborative Supply Chain Portal

Emerson is a large corporation that deals in many areas of business. The company provides other businesses with technology, software, and advice in many areas as well as providing household consumers with appliance products for their home. Given that Emerson supplies other organizations, they are embedded deeply in the supply chain. Emerson is a company that gives supply chain advice and expertise to other companies, so naturally their own supply chain is top-notch. Emerson began using a Collaborative Supply Portal system which automates inventory, order, and shipping processes. Each piece of inventory has a barcode so that the system is able to be updated each time any action is taken. The system has helped Emerson run lean business practices. Read more.

Forecast Errors
Volume 2, Issue 9, March 2, 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.

Lack of Supply Chain Collaboration Drives Forecast Errors

Logistics Insight Asia looked at how collaboration and supply chain go hand in hand. The reality is that each aspect of a manufacturer’s supply chain, whether its procurement, design engineering, or logistics, often operate in very distinct silos and each department rarely collaborates, shares, or communicates with one another. Today’s supply chain executives should be able to respond to changes in real-time and use up-to-the minute information to drive intelligent decision making. If the necessary data cannot be shared throughout the supply chain because systems are not integrated, companies will be left with costly forecast errors. Read more.

Forecast Errors
Volume 2, Issue 8, February 23, 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 Avoided by Aligning Inventory with Real-time Demand

Increased adoption of automation will help manufacturers create new revenue streams and lower costs. Real-time demand fulfillment will require tight integration of supply chain, production, logistics and marketing. The ability to sense demand in real-time and respond by changing prices or promotions through the utilization of segmented logistics, inventory and performance capacities, will allow for the optimization of integrated responses. Re-shoring will continue but supply chains will remain global, large and complex: Re-shoring will remain a focus as manufacturers search for efficiencies and innovation, but supply chains will still be complicated, requiring increased visibility provided by the industrial IoT. View here.

Reducing Order to Ship Times Also Reduces Forecast Errors

Forecast Errors
Volume 2, Issue 7, February 16, 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.

Companies Should Move from MRP Forecasts to End to End Pull

Manufacturing companies often use a Material Requirements Planning (MRP) forecast as a basis for Sales and Operations Planning (S&OP). However, MRP and supplier forecasting produce more problems in the supply chain than they solve. Errors in shipping, receiving or inventory reporting, or production schedule adjustments, change MRP data. Often the numbers cannot be quickly updated. Gartner Research Analysts recommend manufacturing companies to engage with customers and suppliers to establish a pull process from Finished Goods to Raw Materials. This is how Gartner defines End to End Pull replenishment. Read more.

Forecast Errors
Volume 2, Issue 6, February 9, 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.

Inventory Shrinkage Can be Catastrophic

IMPO Magazine reported that for manufacturers, employee theft isn’t the only potential problem regarding inventory. Complex production processes and the sheer volume of products and materials in the warehouse can make it hard to get a handle on inventory. This can result in inventory shrinkage, where the actual number of items on your shelves is lower than the number of recorded items. In the manufacturing world, shrinkage can also refer to the loss of raw materials, such as metal or food ingredients, during the production process.  Regardless of what went missing or how it went astray, even small amounts of inventory shrinkage have a big effect on the bottom line. Read more.

Forecast Errors
Volume 2, Issue 5, February 2, 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.

SKU Proliferation Requires Mapping the Supply Chain

Dan Gilmore, Editor-in-Chief of Supply Chain Digest talked about the inventory-to-sales ratio, as tracked by the US government. The ratio measures on-hand inventory levels against one month's worth of sales. As can be seen, other than the wild gyration in 2008-09 associated with the great recession, inventory levels have in fact been flat for a decade, even gently rising in the past few years. That despite lots of efforts to attack inventory, much technology was spent to do so. A general bias was seen in the last few years towards top line revenue growth, relatedly SKU proliferation and new product introductions, and longer offshore supply chains. The data suggests many companies may have simply hit an inventory wall within the context of their current supply chain designs. The imperative to map and model a company's supply chain took on extra urgency after the events of 2012, the earthquake and tsunami in Japan and massive flooding in Thailand, which caused huge supply chain disruptions. Shortly thereafter, a Toyota executive noted, "Our assumption that we had a total grip on our supply chain proved to be an illusion." Read more.

Forecast Errors
Volume 2, Issue 4, January 26, 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.

Persistent Capacity Shortages Expected to Keep Cost to Ship Goods 'Elevated' 

Supply Chain Brain reported that FTR's Shippers Conditions Index remained basically unchanged from the previous months reflecting continued capacity shortages that degrade service and push rates higher. With sustained capacity tightness and fleets now announcing pay increases, the cost to ship goods is expected to remain elevated. The typical slowdown in freight tonnage during the winter months will only offer a minor and short term reprieve with the Shippers Conditions Index (SCI) expected to remain in the current range for the foreseeable future. These types of capacity issues are often causal to inventory forecast errors. Read more.

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.