Forecast management is a today’s challenge for all industrial companies. Afterward, what about improving accuracy with the mix of sales and supply chain skills?
We are working with multiple Supply Chain teams of industrial companies from different fiels (Aerospace, pharmaceutics, medical device, chemical industry,…). As a result, we identified a missing connection between sales and supply chain teams. We think it would be interesting for Supply Chain and Sales teams to join their strengths to improve demand management performance. How to do it?
Supply Chain teams know the final use and the real impact of the forecast performance on the inventory level and global supply chain cost/performance. Besides sales teams have a connection with the customers and the knowledge about the market.
Why is the forecast accuracy poor in today’s industrial supply chains?
Forecast management is about the customer relationship and data analysis.
In the APICS dictionary, forecast estimates future demand and can be constructed using quantitative methods, qualitative or a combination of methods (…).
We report from different customers experiences that sales reps are primarily responsible for the forecast inputs and use mainly qualitative data and judgement without any analysis of the past demand.
Information and data are available, but the communication is inefficient between both teams.
When the sales teams don’t use and analyze the customer demand to create their forecasts
We will take an example to illustrate our article. The product demand shape is like the one in the chart below. The demand is relatively smooth with an increasing trend.
If you ask the question to your sales representatives about the effective demand, do you think they have the idea of the demand shape of their articles?
The sales rep created the forecast every month with qualitative methodology, mainly their judgement.
When we worked with the demand management team, the performance was like you see in the chart below. The forecast were always above the real demand.
What about creating a routine between sales and supply chain team?
The idea of the mix of the knowledge between the supply chain teams and the sales is to use the market knowledge from the sales and the data analysis skills of the supply chain team. Additionally, the target is to finally improve the demand analysis and forecast accuracy by joining the strength of both teams.
As a result, we proposed a new model with a mix of qualitative and quantitative methodologies.
Consequently, we proposed using the sales and the forecast model of the Supply Chain teams to then improve the accuracy.
Thanks to these results, the teams have implemented a monthly meeting between sales and demand management to work on forecast analysis and communication improvement.
Subsequently, the demand management and communication improved!
The improvement on the forecast and communication in the global supply chain
Firstly, the initial forecast accuracy of the sales rep was 63%. We achieved 84% with the new mixed process.
The sales were able to communicate all main changes in the market to the supply chain team. Meanwhile, the SCM shared the production or distribution issues with the sales.
In the end, the bullwhip effect also decreased in the global supply chain!
As I say to my trainees in class, 100% forecast accuracy is impossible. Therefore, there are many ways to improve forecasting performance!
The coordination between Supply Chain and Sales team is the dream team for your global demand management performance!
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