Forecast Errors
Volume 2, Issue 18, May 4, 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.
Moving Away from Forecast Driven Business Models
In a recent webinar, participants were asked “How accurate do you think the forecast for your company usually is?” With 54% of the respondents claiming less than 60% forecast accuracy, it is not surprising supply chain professionals have to spend a large portion of the day making additional corrective action spreadsheets and providing them to suppliers. Supply chain professionals in the automotive, aerospace, medical devices, electronic components, fitness equipment, pharmaceutical, and manufacturing industries were also asked how to improve forecast accuracy within the company. Two choices, “changing production to a demand-driven model” and “implementing a pull process,” (33% combined), though not a majority, bodes well for the future of manufacturing. Read more.
Demand Drive Supply Chain Management at Lowe’s and Home Hardware
Chain Store Age looked at Lowe’s and Home Hardware, both retailers have implemented demand driven supply chains. The era of the “push” supply chain, where retailers do their best to determine consumer demand well ahead of time and offer a select assortment, is ending. E-commerce platforms that offer a nearly limitless supply of inventory, along with a high degree of digital customization, have changed consumer expectations across all channels. Even in brick-and-mortar stores, consumers now expect to be able to “pull” the items they want, when and where they want them. If a product is out of stock, consumers expect it to be fulfilled from another store or a warehouse. Consumers also do not differentiate among shopping channels, meaning features like picking up online orders in stores are now a “must have” instead of a “nice extra.” Ultriva is the leader in demand driven supply chain technology. Read more.
Manufacturers Cannot Forecast Based on Superstition
A study by CXO Advisory showed that from 1998 to 2012, only 47% of market predictions were correct – this is surprising considering that if one was blindly guessing, the result would be 50%. Or the focus on the Chinese lunar calendar’s “insight” into the housing market: an unexpected number of people place weight on the premonition that the Year of the Goat will bring positive market performance. Reasons cited have ranged from the slightly rational (based on past performance in previous Goat Years), to blind justification without any rationale at all, stating that ‘there is no reason the bull and the goat cannot be friends’. Manufacturers need scientific real-time supply chain information. Read more.
Move from forecast errors to demand driven accuracy:
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