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Pursuing improved forecasts is certainly not an academic exercise. Better forecasting translates directly into making better business decisions. Some research indicates a 6% forecast improvement could improve the perfect order by 10% and deliver a 10-15% reduction in unnecessary inventory.
Layering a demand sensing capability onto the overall demand management process will generate significant improvements to a company’s core KPI’s. Revenue will improve given the ability to sense and react to changes in demand and capturing additional sales. Profit margins will improve by avoiding costly supply chain inefficiencies stemming from demand variability. Cash flows along with higher return on invested capital will improve through the reduction of risk-based inventory positions.
From a supply chain perspective, companies can expect to see improvements in order fulfillment rates, the smoothing of production schedules, as well as reductions in transportation and warehousing costs. Considering that up to 80% of a company’s Cost of Goods Sold is actually incurred within a 6 week window of retail replenishment, doesn’t it make sense to drive a more accurate near-term window?
Want to learn more about demand sensing? I suggest you read the new white paper, What is Demand Sensing? Much More than a Demand Management Revolution.
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