Supply Chain Management Best Practices, 3rd Edition

CHAPTER 4Planning and Forecasting: Headed for the Future

Flashpoints

• Accurately forecasting product demand is the most important measure of a company's supply chain operation.
• Having too much inventory is not better than having too little.
• A supply chain plan is only as good as the information that goes into it.
• Supply chain data analytics offer a way for companies to gain a better understanding of the current state of their operations, and to identify how to achieve better outcomes.

Every supply chain program, good or bad, launches from a plan. It's the ability to forecast and analyze product demand, consumer buying patterns, and economic trends that separates the winners from the losers. In reality, any kind of a forecast is going to involve the black arts of predicting the future, a process that inevitably will result in some errors even under the best circumstances. It's not an issue of what happens if a forecast goes wrong—it's more an issue of by how much.

The history of supply chain management includes some notoriously bad plans—plans so far off the mark that they've become legendary in the “what-were-they-thinking?” category. The bigger the company is, the more spectacular are its supply chain glitches since the ripple effects can extend well past the four walls of the company to include suppliers and customers. And as we saw in the previous chapter, the bigger the supply chain glitches, the bigger the hit a company takes to its share price and ultimately, its ...