Sales forecasts are often inaccurate simply because the sales team is forced to give a number even though they don’t really know what their customer demand is going to be. Let the sales teams sell. Don’t bother playing the game of feigning acceptance of these forecasts when both sides (sales and supply chain) know it is often nothing more than a WAG. Do this instead:
- Accept demand variability as a fact of life. Develop a planning process that does a better job account for demand variability.
- Agree on a level of stockout risk that is acceptable across groups of items.
- Once the stockout risk is agreed to, use software to generate an accurate estimate of the safety stock needed to counter the demand variability.
- Get buy-in. Customers must be willing to pay a higher price per unit for you to deliver extremely high service levels. Salespeople must accept that certain items are more likely to have backorders if they prioritize inventory investment on other items.
- Using a consensus #safetystock process ensures you are properly buffering and setting the right expectations with sales, customers, finance, and supply chain.
When you do this, you free all parties from having to play the prediction game they were not equipped to play in the first place. You’ll get better results, such as higher service levels with lower inventory costs. And with much less finger-pointing.
