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How do you measure lost sales?
I was recently working with a pharmaceutical company and was surprised to find that their supply chain team was measured only on stock placement against the month’s sales forecast.
The team prided at having more than 98% demand fulfilment. When I went deeper into their working, I realized that any customer orders which were beyond the forecast were not considered as unfulfilled demand. The company may actually be losing demand to the extent of 10-20% of their current sales due to the inevitable inaccuracy in forecasting. However, this was not considered as lost sales.
How you measure your lost sales is an important component of assessing the benefits of moving from a forecast-based to a demand-driven supply chain.