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Why do we resist frequent forecast changes?
Most supply chain teams I have interacted with, resist frequent changes to the demand forecast. Once the monthly forecast is finalized at the S&OP or IBP meeting, they want it frozen. A few teams are more liberal and allow one revision at the beginning of the month.
Why do supply chain teams resist more frequent forecast changes? They say that the entire supply plan would need revision every time the forecast changes and would lead to shortages as well as inventory pile ups.
The truth is entirely opposite. Shortages and inventory pile ups happen because we don’t allow forecast revisions. It is like closing our eyes to the reality and remaining in the fantasy world of deterministic demand.
Do we control whether consumers buy the quantities that we have forecast? Of course not. Millions of consumers make these decisions every day. If the trends indicate either an accelerating or a decelerating demand scenario, how wise is it to ignore it? Can we still call ourselves consumer centric?
Of course, allowing frequent forecast changes requires the entire value chain to be more flexible and responsiveness. That should be the focus of supply teams.