Shipment Forecast Integrity & Accuracy. Alan G. Dunn, President GDI Consulting & Training Company
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1 Shipment Integrity & Accuracy Alan G. Dunn, President GDI Consulting & Training Company
2 Oliver Wight Said It Better Than Anyone! It seems to me that management believes there are only TWO kinds of shipment forecasts: Lucky or Lousy! Surely with all the tools at our disposal today, we can improve on this condition!
3 Shipment ing Is MOSTLY About Data 80% Data 10% Informed Opinion 10% Luck
4 FOUR Major Questions When Addressing the Subject of Error Reduction 1. Can forecasts be improved? 2. What to measure? 3. What drives forecasts? 4. How should forecasting be organized?
5 1. Can s Be Improved?
6 Should We Try One of These Approaches? Model historical data better? Use more robust mathematical models? Stop allowing sales people to forecast? Forget it! just stock a ton of inventory!
7 We Need To Understand Why We In the First Place The cumulative lead-time is greater than the time the customer is willing to wait. Customer Willing To Wait Time Coverage Cumulative Lead-Time No More! New Cumulative Lead-Time???
8 The ABSOLUTE BEST Answer. Reduce Lead Times!
9 No Need To Here! The ABSOLUTE BEST Answer. Reduce Lead Times! No Need To Here!
10 2. What To Measure?
11 What Do You Do When Your Is Wrong The Obvious Answer Again With New Data!
12 From Period Which Is the Measurable? Early In Period 1, We Periods 2 Thru 6 Iteration Period Demand Amounts Imagine the cumulative planning lead-time is 5 periods
13 From Period Which Is the Measurable? Early In Period 2, We Re- Periods 3 Thru Iteration Period Demand Amounts Imagine the cumulative planning lead-time is 5 periods
14 From Period Which Is the Measurable? Early In Period 3, We Re- Periods 4 Thru Iteration Period Demand Amounts Imagine the cumulative planning lead-time is 5 periods
15 From Period Which Is the Measurable? Early In Period 4, We Re- Periods 5 Thru Iteration Period Demand Amounts Imagine the cumulative planning lead-time is 5 periods
16 From Period What is Period 5 s Error? Iteration Period Demand Amounts Actual Shipments = 260 Utilized = Error = Period 5 s Error Is =???
17 From Period The Answer Is NEGATIVE 40! Iteration Period Demand Amounts Actual Shipments = 260 Utilized = 300 Error = (40) Period 5 s Error Is = (40)
18 3. What Drives s?
19 Know Your Demand s SIX Perpetrators 1. Market Perpetrators 2. Customer Perpetrators 3. Condition Perpetrators 4. Event Perpetrators 5. Sales Personnel Perpetrators 6. Disruptors
20 4. How Should ing Be Organized?
21 A Is Mostly the Natural Result of FOUR Major Inputs 1. Historical Information (Past) 2. Current Information (Present) 3. Marketing Requirements Information (Future) 4. Chief er Judgment
22 ing CANNOT Be Executed Effectively Without a Defined Process & a Chief er Margin MRD 1 Revenue COGS Shipment History Unit MRD 2
23 If Your Stinks, Maybe Its Your ing PROCESS! Near Future Information Margin MRD 1 Revenue COGS Shipment History Future Unit Past Far Future Information MRD 2 Execution Present
24 Stop Thinking Your Sales Goal Is a! Sales Goal = $2,300,000 (Set by the President) = $1,900,000 (Set by the Chief er) Oops! What does the Chief er do now? A Sales Goal and a Shipment are NOT the Same Thing!
25 NEVER Lose Sight of This Truism All Error Ends Up In Inventory and Inventory Is the GIANT Sucking Sound of Capital!
26
27 Presenter Contact: Alan G. Dunn, President 140 North Maple Street, Suite 105 Corona, California USA (951)
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