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Achieving the Impossible: Forecasting

Alexander the Crystal Seer

The Great Alexander generates a sales forecast

Some say “accurate forecasting” is an oxymoron. How often have you heard, “We can’t develop a good plan because we can’t get an accurate forecast from sales!”

Many companies base their purchasing plans on forecasts, those always inaccurate, often sandbagged predictions of the future that the sales team occasionally generates so as not to put too much pressure on themselves to meet their budgets. Right out of the gate, purchasing and supply chain planning is a seemingly impossible task.

But wait, there really is a way to overcome that gargantuan obstacle! If supply chain can be extremely flexible and responsive with only high level indications of planned sales, it is possible to provide exceptional customer service with low inventory and maximum profit.

There are four things supply chain and purchasing must manage to achieve the impossible:

1) Supplier performance

2) Demand

3) Product portfolio

4) Inventory

In order to become highly flexible and provide world-class service, supply chain must make sure suppliers get the right material, at the right time, to the right place at the lowest possible cost. Next, supply chain must work with sales to manage demand. Toyota does this very successfully even though they have over a million possible permutations of their products. Third, the product portfolio must be managed to assure that products that actually sell are produced and kept in the warehouse. New product introduction and old product elimination must be handled deliberately. Finally, the inventory you do have must be accurate. You need to know what you have, where it is and its availability to be shipped.

By focusing on these four elements, supply chain and purchasing teams can overcome inaccurate forecasts and accelerate profit and growth.

© 2015 – Rick Pay – All rights reserved

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