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How does Forecast Accuracy KPI impact the Supply Chain team behaviour?
KPI of Forecast Accuracy has a substantial impact on the working of the entire company. We have seen how it affects behaviour of the sales team. Let’s turn our focus now to the Supply Chain team.
If the entire company’s focus is on Forecast Accuracy, supply chain team endeavours to make stocks available for sale to the extent of forecast at each location. Teams often tend to disregard actual demand velocity and instead focus on forecast placement. If a location has enough stocks but short on forecast, it gets prioritised over another location which has received forecast stocks but is currently low on stocks.
It distorts the logic of stock allocation to favour forecasts over product availability. The result is stockouts at some location and surplus inventory at other locations.
Hope you can now appreciate an important root cause of inventory mismatch.