Trevor Miles, vice president, thought leadership, Kinaxis
For many years SC management has been separated out into two distinct practices of planning and execution, with the bulk of the 1990's and 2000's being spent on planning. And yet a study by Terra Technologies and anecdotal evidence both indicate that forecast accuracy by item and customer is seldom above 75%, often as low 50%. From this we can deduce that the supply plan is at best 50% correct, though of course postponement strategies tend to increase the accuracy as one moves back up the SC. However, the further back one goes, the greater the effect of the bull-whip. Therefore, is the next breakthrough in performance going to come from planning better or learning to respond profitably to real demand? While we should always do what we can to improve our forward visibility to demand, including predictive analytics, if we start from the perspective that the forecast will always have significant error, the capabilities to develop at the 'time to detect' and the 'time to correct'. These are the essential elements of response management: Knowing sooner, and responding with confidence.
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