Why do my Forecasts still stink?

By Josh Coughlin, CTO Enhanced Retail Solutions

We all spend an extraordinary amount of time talking, thinking, dreaming, etc. about inventory.  Every business that sells a physical product must think about inventory.  If you don’t have enough, you miss sales leaving money on the table. If you have too much, you are stuck selling off excess inventory for pennies on the dollar.  Inventory control is the most important thing because inventory equals money, and money is tied up until that inventory is sold.  We are living in extraordinary times- there is no doubt about that- but everything that is going on has not changed the fundamental fact that forecasting is hard, and it has always been hard.

The Hunt for A Solution

As a company you are always trying to improve your forecasting accuracy, leading to less of your capital being tied up in product.  So, you launch a project to look at all the companies that offer forecasting software.  You look at the big companies (think 3 letter names) and startups that raised 20 million dollars and advertise sexy technology.  You spend 6 months to a year evaluating and picking one.  Then you spend months if not years implementing the software to be sure all the inputs are just right.  You make it live and it spits out a forecast.  Guess what? The forecast is no more accurate or better than you had before. Chances are it is worse.  You frantically call your software rep and then you get blamed because the data, settings, etc. were not setup correctly.  Rinse and repeat.

A Smarter, More Practical Solution

I honestly don’t think forecasting systems in a vacuum could produce numbers that are very accurate.  This is because a forecast is completely dependent on the entire supply chain, yet people focus only on the estimated sales or shipments.  If one part of the supply chain has a disruption the butterfly effect has enormous implications for that forecast. For example, a disruption in WIP (work in process) to the retail stores.  That is why we created a new holistic forecast that looks at everything and outlines the bottlenecks. These can then be out ironed out.  For example, it can show how moving a shipment up a week or two could keep you completely in-stock months in advance.  This allows you to fulfill your retailer’s orders complete, causing all stores to be in-stock and your sales to reach the full potential.  Since we have your POS sales and inventory, we can look at the individual store/SKU combinations to see if a store is consistently running out of stock and not reaching full potential or if a store is overstocking a specific SKU.  There are many more examples of how looking at the complete picture and fixing all the points in between can lead to better forecasts.  Ultimately saving you money on inventory and at the same time making you money by being in-stock. To learn more about Forecast^10 click here.

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