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  • Writer's pictureOperations Rx

The forecast was wrong (But that shouldn’t matter)

Businesses spend a lot of money on forecasting the future and its grown into an amazingly large industry.  But there’s one issue: it’s filled with more college experience than industry experience.  Amazon and Walmart have demonstrated to the world what can be achieved when it comes to supply chain excellence and predictive forecasting, but people always focus on the shiny box, rather than the gritty process.  These businesses have removed almost all the variability out of their supply chain and are focusing on the last 0.1% that it makes sense to make sure their tech is up to par of their operations.  But unfortunately, many businesses that find themselves behind are desperate to compete in cut-throat markets and think that they can make it with the shiny box and not the grit.

Supply chain is about eliminating variability.  Shortages and excess inventory are results of having too much variability.  Statistical forecasts try their best to guess what’s going to happen, but the farther out they forecast, the more off they will be.  So therefore, the trick is to reduce how far out you need to guess.  Reducing lead time and increasing responsiveness shortens that window and should be the focus of every manufacturing and distribution business.

Walmart and Amazon have a lot of weight they can throw around to negotiate with their suppliers, but even if your business doesn’t, there are ways to reduce lead time.  Manufacturing excellence through lean manufacturing and proper scheduling is one, but proper inventory planning is the other.  Maximizing the value of your inventory investment by strategically setting inventory buffers at bottlenecks or diverging paths can help optimize constraints and increase reaction time.

These concepts are all cornerstones to the solutions we provide.  We bring decades of industry experience to each of our projects and pride ourselves on our ability to

  1. Reduce inventory

  2. Increase fill rates

  3. Increase margin

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