The Smart Forecaster

Pursuing best practices in demand planning, forecasting and inventory optimization

The Right Forecast Accuracy Metric for Inventory Planning.

The Right Forecast Accuracy Metric for Inventory Planning.

Traditional forecasting accuracy metrics aren’t applicable when the goal is to optimize inventory. It’s “service level accuracy” that matters because just setting a service target doesn’t mean you’ll actually achieve it. Poor accuracy here has extremely costly implications. The right way to measure accuracy for inventory planning is to focus on the accuracy of the service level projection. This blog explains why and details how to calculate the metric.

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The Real Culprits of Stockouts and Excess

The Real Culprits of Stockouts and Excess

Service level and fill rate are two important metrics for measuring how effectively customer demand is satisfied. These terms are often confused and understanding the differences can help improve your inventory planning process. This video blog (Vlog) helps illustrate the difference with a simple example using Excel

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5 Demand Planning Tips for Calculating Forecast Uncertainty

5 Demand Planning Tips for Calculating Forecast Uncertainty

Those who produce forecasts owe it to those who consume forecasts, and to themselves, to be aware of the uncertainty in their forecasts. This note is about how to estimate forecast uncertainty and use the estimates in your demand planning process. We focus on forecasts made in support of demand planning as well as forecasts inherent in optimizing inventory policies involving reorder points, safety stocks, and min/max levels.

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Service Level vs Fill Rate

Service Level vs Fill Rate

Service level and fill rate are two important metrics for measuring how effectively customer demand is satisfied. These terms are often confused and understanding the differences can help improve your inventory planning process. This video blog (Vlog) helps illustrate the difference with a simple example using Excel

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Excess Inventory Hurts Customer Service!

Excess Inventory Hurts Customer Service!

Many companies adopt a “customer first, better to have the inventory and not need it” approach to inventory planning. While well intentioned, this approach often ignores the role that diminishing returns and opportunity costs play in inventory management impacting the organizations ability to quickly respond to demand.

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MAX-MIN OR ROP – ROQ

MAX-MIN OR ROP – ROQ

This guest blog details the differences between Min-Max and Reorder Point- Order Quantity replenishment logic and why it is important. It is authored by Phillip Slater, Founder of SparePartsKNowHow.com the leading educational resource for spare parts management. Mr. Slater is a global leader and consultant on materials management and specifically, engineering spare parts inventory management and optimization.

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Assessing How Suppliers Influence Your Inventory Costs

Assessing How Suppliers Influence Your Inventory Costs

Software for inventory optimization is most often used to crank out the analytical results you need to run your day-to-day business, such as Reorder Points (also known as Mins) and Order Quantities. This specialized software helps you find the sweet spot that balances inventory costs against item availability during routine operations.

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Getting “Halfway There” with Demand Planning

Getting “Halfway There” with Demand Planning

Demand planning takes time and effort. It’s worth the effort to the extent that it actually helps you make what you need when you need it. But the job can be done well or poorly. We see many manufacturers who stop at the first level when they could easily go to the second level. And with a little more effort, they could go all the way to the third level, utilizing probabilistic modeling to convert demand planning results into an inventory optimization process.

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Beware of Simple Rules of Thumb for Managing Inventory

Beware of Simple Rules of Thumb for Managing Inventory

Managing inventory requires executives to balance competing goals: high product availability versus low investment in inventory. Executives strike this balance by stating availability targets and budget constraints. Then supply chain professionals translate these “commander’s intentions” into detailed specifications about reorder points and order quantities.

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The Advantages of Probability Forecasting

The Advantages of Probability Forecasting

Most demand forecasts are partial or incomplete: They provide only one single number: the most likely value of future demand. This is called a point forecast. Usually, the point forecast estimates the average value of future demand. Much more useful is a forecast of full probability distribution of demand at any future time. This is more commonly referred to as probability forecasting and is much more useful.

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Reveal Your Real Inventory Planning and Forecasting Policy by Answering These 10 Questions

Reveal Your Real Inventory Planning and Forecasting Policy by Answering These 10 Questions

In this blog, we review 10 specific questions you can ask to uncover what’s really happening with the inventory planning and demand forecasting policy at your company. We detail the typical answers provided when a forecasting/inventory planning policy doesn’t really exist, explain how to interpret these answers, and offer some clear advice on what to do about it.

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