A recent white paper, “Seven Methods That Improve Forecast Accuracy,” suggests that a range of forecasting methods helps companies achieve better results. It cites Gartner, arguing, “companies that excel at demand forecasting average 15% less inventory, 17% stronger perfect order fulfillment, 35% shorter cash-to-cash cycle times, and one-tenth as many stock-outs as their peers.”
While forecast accuracy is important to get right (or as close to right as possible, because we know that all forecasts are wrong merely by definition — at best a forecast is an educated guess), it cannot be the sole focus. A supply chain is made up of the sum of its parts, forecasting being just one of them. Even if you get the forecast 100-percent right but you can’t execute against it, you still are not any better off.
In addition, forecasting is very dependent on historical information. With bad execution data, the forecast will be fed by “bad data.” Data integrity is of critical importance to your supply chain’s performance. Getting a more collaborative model together, such as sales and operations planning (S&OP) and client/supplier collaboration inputs, will have a far bigger impact on supply chain performance than merely an increased forecast accuracy.
Learn more about the importance of optimizing your organization’s supply chain through S&OP and other strategies.Tags: forecasting, SAP Best Practices, Supply chain