Who says supply chain management can’t impact top-line performance? Just a couple of weeks ago I wrote a post entitled “Can anyone accurately predict demand right now?“ Now, today’s Wall Street Journal is running an article entitled “Better scratch that Kindle off your list.” (subscription required).
According to the story, “For the second holiday shopping season in a row, Amazon.com Inc.’s Kindle e-book reader is out of stock, and more of the devices won’t be available until mid-February, at the earliest.” Ouch!
Ironically, Amazon thought it had plenty in stock until Oprah endorsed the e-reader on her show.
While not every business has to worry about Oprah messing with their demand planning process, the reality is that it’s become exceptionally hard to accurately forecast demand today. There are several things you can do, but two most notably are to focus on improving your demand planning/forecasting process or focus on improving your demand management processes (identifying misalignments and balancing demand and supply). The reality is that you should do both, but the sad truth is too many companies focus predominantly or solely on the former. A better approach would be to acknowledge the high degree of uncertainly in accurately predicting demand and making sure that you are best-in-class at dealing with demand uncertainty. Excellence in demand management ensures you are a market leader whether you get your forecast right (which of course is the goal) or not (which of course is the reality).
Given the demand uncertainty in today’s market, there’s no better time than now to be establishing excellence in demand management.
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Tags: Demand management, Demand planning
Posted in Demand management
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It is very true that planning accurate demand forecasting is becoming complex difficult now a days. One has to take consideration for all type of uncertainty for making forecast. Forecast will never be accurate and one should try for 100% accuracy but one should try to minimize the forecasting error.
By setting the bar lower for forecast accuracy, we are settling for mediocrity moving forward. This attitudue will prevent organizations from moving to sharing information and continue to walk around with blindfolders on
I don’t think the suggestion is that we should be lowering the bar for forecast accuracy. What I’ve seen with the companies that we work with is that they all continue to strive to improve their forecast accuracy. However, they also all realize that in an increasingly volatile and changing world, forecasts just won’t be perfect. So, they are complementing their investments in forecasting with investments to ensure they can perform well when the forecast isn’t right, since that is increasingly the case due to the nature of the business environment.