Forecast Errors
Volume 2, Issue 16, April 20, 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.
Manufacturer Eliminates Forecast Errors Moving To Pull-Based Replenishment
A major medical device manufacturer moved from manual processes to a cloud-based automated system. By deploying Electronic Kanban the manufacturer, their customers and their supply chain partners benefited by an improved responsiveness to customer demand by transitioning from push or forecast-based production to pull-based replenishment, thus eliminating forecast errors. The new system allowed them to manage inventory and supply chain execution across their extended enterprise value chain. Read more.
Manufacturing Sector Learns from Late Over-Budget Projects
Yael Grushka-Cockayne reported for the Washington Post that projects are often late, over-budgeted or under-delivered. The New York City Department of Parks and Recreation is responsible for maintaining more than 1,700 city parks and recreational facilities on more than 29,098 acres. The department completes about 150 capital construction projects a year. In the fiscal year 2011, its spending on capital projects was $496 million. A 2013 audit found that 47 percent of the projects were not completed within their originally scheduled time frames and that 10 percent exceeded their original budgets, with increased project costs of $13 million. This margin of error would put many manufacturers out of business. Read more.
Sweden’s Forecasting Errors Takes Them from Best to Worst
Bloomberg recently reported that Sweden’s central bank has gone from best to worst among its peers at forecasting inflation. The errors can be traced back to 2010. That’s when policy makers, led by Governor Stefan Ingves, started raising rates in the middle of Europe’s worst economic crisis since WWII. Ingves said at the time the Riksbank was fighting the risk of an overheated housing market. Since then, the bank lagged behind its peers in predicting inflation. Manufacturers face similar peril in the U.S., however such errors are more likely to be felt more quickly. Read more.
Trinidad and Tobago Suffer Badly from Forecast Errors
The Trinidad and Tobago News reported that economic forecasters always make errors. During Senate Question Time, Finance and Economy Minister Larry Howai was asked by PNM Senator Dr. Lester Henry to explain the main reasons for the revised estimates of economic growth for 2014, from a predicted 2.5 percent to 0.5 percent, as announced by the Central Bank in December 2014. “There are always issues and there are always forecasting errors,” Howai said. He cited the 2008 global economic meltdown which was attributed to a collapse in the sub-prime mortgage market bubble. That meltdown resulted in the worst level of recession for global actors in decades. At least manufacturers have the distinct advantage of real-time supply chain visibility to avoid these forecast errors. Read more.
Move from forecast errors to demand driven accuracy:
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