Regarding the headaches of demand forecasting

What’s the bigger risk for supply chains: Forecasts that overestimate demand, or forecasts that underestimate it?

Hmmm … would you rather have an impacted wisdom tooth or need a root canal?

Kinaxis, a strategic partner of Technology Forecasters, has some interesting thoughts on both problems - forecasting, not teeth - in its recent blogs.

A post on Aug. 22 looks at the problem of unexpected demand. The Aug. 9 post recognizes the flipside: Misguided forecasts that lead to excess inventory. (Unless you were asleep in 2000 and 2001 you probably remember what the latter was like.)

Both are worth reading.

A second post on Aug. 22 talks about the need for software systems and business processes that allow supply chains to manage problems that result from faulty forecasts. That post wisely concludes that the human factor is as important as the software. To wit: “In the face of constant change, companies need to empower people with the right information and tools to respond quickly and accurately.”

Empowering people is certainly one of the keys to solving the ongoing dilema of faulty forecasting. We’re reminded of a piece of research conducted earlier this year by Technology Forecasters for the Quarterly Forum in March.

“Supply Chain Software: Investments and Trends Among OEMs and EMS Providers,” concludes, in part, that even with recent improvements in supply chain software, “we find that collaboration through supply chain software systems remains fairly limited between EMS providers, their suppliers, and customers.”

The report recommends several areas that are ripe for greater collaboration along supply chains. At the top of that list: Order management and forecasting.

What are your biggest obstacles to collaborative forecasting?

Posted by Bill Roberts, August 24th, 2007