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 Impact Track and Trace Capabilities
Chuck Fuerst recently shared in Logistics Viewpoints that the need for track and trace capabilities in industries such as food and beverage, manufacturing or automotive industries is obvious: the threat of contamination or recalls impacts public safety, and the responses to those events are highly regulated. Organizations need to know what goes into their products and their location at all times. But increasingly, companies in other industries are taking a fresh look at the need for advanced tracking and tracing capabilities that are critical throughout the order process and can drive efficiencies the entire way through, from picking to returns. According to a report by Aberdeen Group and GS1, e-commerce and multi-channel demands on companies are increasing, with 65 percent of respondents bypassing their own DCs to ship directly to stores via suppliers or 3PLs, along with 63 percent stating that supply chain visibility is a “high priority for improvement.” See what our QMS software can do,
Forecast Errors Major Issue for Distribution Management
One year ago, Thomas P. Gale looked at the State of Analytics in Distribution for Modern Distribution Management (MDM.) Gale examined the key trends in the adoption and use of analytics in wholesale distribution. Research conducted by MDM on the adoption and use of analytics by wholesale distribution companies revealed the wholesale distribution industry is transitioning to a more data-driven mindset, but there are widely different views on what that means. Many distributors say they don’t have the right analytic tools, technologies and talent needed to stay competitive in quickly shifting markets. Survey respondents are generally satisfied with analytics centered on operational efficiencies and financial reporting, but less satisfied with deployment of more strategic tools focused on profitability, sales, marketing and service development. These analytics are being addressed in 2015. Read here.
Forecast Errors Reduced as Supply Chain Planning and Retail Planning Merge
European Business Review recently had Karin L. Bursa examine what can be learned from the collision of the supply chain and retail. According to Bursa, Supply Chain Planning and Retail Planning organizations have operated independently of each other, to the detriment of both. The separation of the two planning organizations has given rise to isolation without collaboration. Retailers are excellent at planning and executing against a short horizon. For the next 2-3 weeks of the plan they know daily and hourly customer behavior and can adjust the plan on the fly. Supply Chain managers see the short and long-term operations of the company – what is around the corner, how suppliers and partners are performing, where challenges and opportunities may develop. The Retail Planning team on the other hand, sits at the front line of sales, experiencing day-to-day shifts in demand, accumulating massive amounts of point-of-sale data, and spotting trends of what is hot and what is not. Something new is brewing; the maturation of the Global Demand-Driven Supply Chain Planning process. Read more.
Move from forecast errors to demand driven accuracy:
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