Lean supply chain, Pt. 3: accountability in demand forecasting
- May 18th, 2015
- By: Scott Robinson
Demand forecasting is problematic for a number of reasons, but its importance in the lean supply chain is obvious. Getting control of the forecasting process may require a re-thinking of who is contributing to the process within the enterprise and how various contributors approach forecasting.
Process and planning expert Jakob Bjorklund has suggested that one issue that may compromise the accuracy of demand forecasting is accountability for the process.
“It is imperative,” he said, “that a manufacturing enterprise assign demand forecasting to an independent party within the company that has more of a holistic point of view than would sales, manufacturing or any other specific department.”
Increased demand forecasting accuracy means lower inventory levels and enhanced customer service, he said, and those are very desirable goals – but in pursuit of those goals, many companies disseminate responsibility for demand forecasting across all of the departments it affects. This is an innocent mistake, but it can introduce error in forecasting.
In Bjorklund’s example, demand forecasting in the hands of the sales department may lead to overly optimistic projections; manufacturing operations, on the other hand, may introduce overly cautious projections, erring on the side of conservatism.
Getting everyone’s input into the process is not a bad thing in itself, he said, but in the end, no single individual or department ends up being accountable for the accuracy of the demand forecasting process, and this is a problem: “It is not surprising that, as a result, this crucial role tends to fall between chairs in many enterprises,” he said.
Identifying a proper accountable authority within the company to master and monitor demand forecasting, he said, is a crucial component in improving forecasting accuracy.