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Inertia in demand forecasting leads to higher errors.
S&OP process in most companies requires demand forecasting to be done monthly. It’s a practice which is rarely questioned. What is so sacrosanct about the monthly frequency?
We operate in an environment which is getting more and more dynamic in terms of predictability of consumer demand. Forecasts done in the S&OP process get outdated within a few days, as the demand patterns continue to evolve. However, we see inertia in the companies to refresh these forecasts during the month.
Static view of demand in a dynamic demand environment is bound to lead to higher errors and the way to bring it under control is to challenge the practice of monthly frequency and go for more frequent refresh.
Companies at the leading edge have already moved to daily demand refresh, aided by a Demand Sensing engine which deploys AI/ML based self-learning models to decipher the emerging demand patterns at the most granular level.