Forecast Errors
Volume 2, Issue 19, May 11, 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.
Too Much Inventory is Costly
Manufacturers and distributors are frequently nervous about running out of stock, and tempted to overstock. Holding excess stock is not a lean practice and highly inefficient. Start with a decent projection of sales and tracking software to help calculate the rate of product turnover. This helps manage inventory risk and reduce overstocking. Forecast errors can be avoided by monitoring real-time inventory data. Read more.
No Audit Controls Lead to Forecast Errors
Inventory audits are essential to check counters, shelves, and inventory that is not out on display. Periodically manufacturers and distributors must review complete inventory to eliminate errors, including pricing and stocking errors, as well as SKU errors and any defective products that may have made their way out onto the shelves. Inventory must be in the right place, and the right size to be productive. Read more.
Costly Mistakes Happen
Max Gardiner, author and assistant manager in a stockroom, said, “Mistakes happen. What you do about them is what counts.” Shipments received with an error in the counts, or something inherently wrong about the inventory tracking, SKUs or the product itself, there needs to be a system that is capable of sorting this out and resolving it before the items are input into the company technology. Errors have the potential to cost hundreds of thousands of dollars in over or under-stocking in any given month. There is a way to improve Inventory turns and eliminate those stockouts. View here.
Internal Audit Shows $20.7 Million Reduction in Sales
BidnessETC reporter Hannah Ishmael reported that Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) has paid as much as $46 million combined to two of the top executives who left the company following the accounting scandal late last year. The payment to these officials followed the company’s recent decision to sell itself to Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Last year, Salix had to face an inventory glitch which provoked the US Securities and Exchange Commission (SEC) to investigate the matter and get an internal audit done for Salix. Salix had announced that the company had got into some financial problems as sales were recorded in the wrong period, millions of dollars were left unaccounted for in potential product returns, and rebates had been counted as business expenses. Salix eventually had to restate the results for seven quarters to make up for the faulty accounting. The restated statements resulted in a sales cut of as much as $20.7 million. As much as $11.9 million was cut from the net income. Read more.
Move from forecast errors to demand driven accuracy:
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