The Smart Forecaster
Pursuing best practices in demand planning,
forecasting and inventory optimization
Are you a hero?
The executive suites at most companies are populated by leaders who became corporate “heroes.” These exceptional performers led—and continue to lead—transformative initiatives that drive revenue growth, reduce costs and increase shareholder value.
Heroic accomplishments require a bold new approach, often fueled by a ground-breaking product or service. Harvard Business School professor Clayton M. Christensen speaks of “disruptive innovation,” the extreme case of a product or practice that creates a fundamentally new market or business approach. (The Harvard Business Review YouTube channel features an interview with Prof. Christensen on the subject here.) The trick is to recognize the possibility, and have the courage to do something about it.
This presents challenges on both sides of the fence. The “best in class” technology provider will have a hard time being heard—getting past entrenched vendors and established practices. The heroic practitioner has to want to hear what’s possible, be open to change and have the drive to execute. Building a community of believers and getting that shot to make a difference can be difficult, but that’s why this work is heroic.
You may be a budding hero, or an executive who can spot opportunities and “hero-making” opportunities in your team. I have encountered many of you over the years, and your successes have been our successes. My advice is simple: go for it. Life is short, possibilities are limitless and your courage will be rewarded.
Nelson Hartunian, PhD, co-founded Smart Software, formerly served as President, and currently oversees it as Chairman of the Board. He has, at various times, headed software development, sales and customer service.
You know the situation: You work out the best way to manage each inventory item by computing the proper reorder points and replenishment targets, then average demand increases or decreases, or demand volatility changes, or suppliers’ lead times change, or your own costs change.
Inventory optimization has become an even higher priority in recent months for many of our customers. Some are finding their products in vastly greater demand; more have the opposite problem. In either case, events like the Covid19 pandemic are forcing a reexamination of standard operating conditions, such as choices of reorder points and order quantities.
To make the right decision, you’ll need to know how demand forecasting supports inventory management, choice of which policy to use, and calculation of the inputs that drive these policies.The process of ordering replenishment stock is sufficiently expensive and cumbersome that you also want to minimize the number of purchase orders you must generate.