Forecast Accuracy: Myth, Reality, Or ... Oxymoron? By Christine Pothier, ModusLink

A look at how innovation and customer choice are changing the way we approach forecasting and execution

New Year's is a time of reflection on both the year that's passed and the one ahead. Nowhere in business is that more true than in supply chain planning. How did your company's sales forecast fare this past holiday season? If your sales forecast hit the target, congratulations; you fared better than many, if not most, businesses. Routinely, accuracy in sales forecasting ranges from 40 percent to 60 percent for most companies. If those business forecasters were meteorologists, they might well be looking for other employment.

The real key to success lies in managing the execution of the supply chain to mitigate the risks of demand variability and forecast inaccuracies.

In all fairness to company forecasters, their jobs haven gotten progressively more challenging in the past decade. This is especially true in the technology industry where a number of factors are wreaking havoc on the planning process, such as:

• technology advancements shorten product lifecycles;
• demand for innovation ignites product line expansion;
• globalization redefines the supply chain landscape and process planning;
• financial pressures influence the balance of cost and service; and
• mass-customization dramatically increases the number of SKUs.