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Why do Supply Chain functions resist frequent forecast changes?
If we want to design a supply chain which is demand driven, hence responsive to any changes in consumer demand pattern, we should first acknowledge that consumer demand at the granular level does evolve over time. If our current processes depend on the forward view of consumer demand over a certain planning horizon, this view must also change as the demand evolves.
Companies working on a forecast driven supply chain call it the demand forecast. The same principles apply here. If the consumer demand is evolving, the demand forecast must also keep pace and change accordingly. If the two are synchronized, we will achieve higher product availability and fresher products offered to consumers.
When I talk to supply chain professionals handling planning, procurement, manufacturing, or distribution function, most of them resist frequent revisions to their demand forecast. Why is it so?
We know that rigidity of demand forecast will lead to stockouts and loss of freshness. The prime reason why they prefer rigidity over flexibility is the fact that their performance is judged more on the local efficiency parameters of their function. In many cases, their performance assessment doesn’t have parameters of product availability and product freshness.
Management will do well to align the primary goals of all the functions to consumer facing parameters of availability and freshness, thereby giving more importance to the overall system effectiveness as against local optimization.