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.