What’s Wrong with Demand Forecasting

A growing number of companies says their forecast accuracy, service levels and inventory efficiency metrics have hit a ceiling that they just can’t get past.

Whether you read the analyst reports or listen to planners talk about their jobs, it’s all the same: metrics and KPIs are stuck.

Demand forecasts should predict two outcomes: the expected demand and how much uncertainty there is in that prediction. Demand predicitions drive most supply chain planning activities. The efficacy of your tools and processes is measured with well-known forecast accuracy KPIs.

“But the need to predict forecast uncertainty is not nearly as clear, and you probably make some gross assumptions about demand uncertainty and just assume they are accurate”, say Jeff Bodenstab and Stefan de Kok of ToolsGroup.

Accurately predicting uncertainty can add enormous value. “That’s because you are focusing on improving not just to the average demand prediction but the entire range of possible demand predictions.”

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