{"id":6459,"date":"2022-01-13T19:36:11","date_gmt":"2022-01-13T18:36:11","guid":{"rendered":"https:\/\/diagma.com\/?p=6459"},"modified":"2022-01-13T19:38:12","modified_gmt":"2022-01-13T18:38:12","slug":"take-advantage-of-poor-quality-forecasts","status":"publish","type":"post","link":"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/","title":{"rendered":"TAKE ADVANTAGE OF \u201cPOOR QUALITY\u201d FORECASTS"},"content":{"rendered":"

Take advantage of \u201cpoor quality\u201d forecasts<\/strong><\/h4>\n

To gain a competitive advantage and ensure the success of your business, you must continuously improve your Supply Chains. This means constantly finding the optimal compromise to provide good quality products, with good service levels, at minimal cost.\u00a0 But what if\u00a0demand forecasting issues<\/strong>\u00a0creep into your planning processes and degrade your service and\u00a0costs?<\/strong><\/p>\n

A 3-step process to improve your forecasts and procurement<\/strong><\/h4>\n

Diagma\u2019s approach makes it possible to rectify\u00a0any forecast<\/strong>\u00a0of demand\u00a0(regardless<\/strong>\u00a0\u00a0ofthe method to obtain it), to remove the \u00a0bias<\/strong>\u00a0and estimate its \u00a0maximum error.<\/strong>\u00a0Indeed, there will always be uncertainty in your forecasts.\u00a0 Too many companies worry about this uncertainty without calculating it and exploiting it\u00a0fully to their advantage.<\/strong>\u00a0 Instead of trying to \u201cguess right\u201d with their forecasts, we recommend that companies follow these steps:<\/p>\n

1st mistake: you think you need a safety stock in number of days of sale, you think that safety stock must be a percentage of the forecast<\/h6>\n

In reality, if you compare your forecasts with with actual demand, you will find that this is not the case. In\u00a0general, the error is rather an absolute\u00a0<\/strong>value. For example, you are wrong by a maximum of 500 units in your forecast whether your forecast is 2000 in off-peak periods or 5000 in peak periods.<\/p>\n

2nd mistake: your forecasts are biased, always too optimistic or pessimistic<\/h6>\n

Visualize the quality of your forecast\u00a0<\/strong>on a chart with the forecast on the abscissa and the actual ordered as the ordinate.\u00a0If you were a soothsayer<\/strong>\u00a0\u00a0all the points would be on the first bisector. This is probably not the case. If you find many\u00a0more points below the bisector or many more above<\/strong>, this is a good indicator that your forecast is probably\u00a0biased.<\/strong>\u00a0 If this is the case, \u00a0draw the regression line<\/strong>\u00a0that passes through the points. The equation of this line gives you a better\u00a0forecast.<\/strong>\u00a0It is no longer biased and the gap between your points and this new line allows you to measure the forecast\u00a0error.<\/strong>\u00a0For example, most of your points are less than 500 above the line. So your \u00a0maximum demand<\/strong>\u00a0will be 500 above the forecast.<\/p>\n

3rd mistake: You use the forecast to replenish your stock or plan production<\/h6>\n

The forecast is only\u00a0an average.<\/strong>\u00a0Using it gives you\u00a0a one in two chance of stockout.<\/strong>\u00a0Except if you use the so called safety stocks, often miscalculated. Drop these safety stocks and plan from the\u00a0maximum expected<\/strong>\u00a0demand.<\/strong>\u00a0Instead of safety stock<\/strong>\u00a0you may decide for example to have manpower on offer if demand requires.<\/p>\n

Use the maximum expected demand<\/strong>\u00a0to feed into your planning processes. This will allow you to\u00a0optimize your flows.<\/strong>\u00a0And to make the best use of\u00a0your resources,\u00a0<\/strong>reduce your stocks.\u00a0 You will get \u00a0better customer service.<\/strong>\u00a0\u00a0You will reduce your costs.<\/p>\n

 <\/p>\n

\"Jean-Patrice
Jean-Patrice Netter<\/a>, President of DIAGMA, jpnetter@diagma.com<\/figcaption><\/figure>\n
\"Photo
Nathan Mayes<\/a>, Director DIAGMA USA, nmayes@diagma.com<\/figcaption><\/figure>\n

 <\/p>\n

To download white paper, click here!<\/a><\/strong><\/p>\n

 <\/p>\n

Articles from same author :<\/strong><\/p>\n

What are some advantages and challenges when adopting Just in Time (JIT) principles into a globalised supply chain?<\/a><\/p>\n

What is the difference between supply chain, operations, and logistics?<\/a><\/p>\n

Hashgraph, the future of the Blockchain for Complex Supply Chains<\/a><\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Transform the disadvantage of \u201cpoor forecasts\u201d into an opportunity to improve them and optimize your entire Supply Chain by following the Diagma view described below.<\/p>\n","protected":false},"author":9,"featured_media":5908,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[187],"tags":[],"acf":[],"yoast_head":"\nTAKE ADVANTAGE OF \u201cPOOR QUALITY\u201d FORECASTS - Diagma<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"TAKE ADVANTAGE OF \u201cPOOR QUALITY\u201d FORECASTS\" \/>\n<meta property=\"og:description\" content=\"Transform the disadvantage of \u201cpoor forecasts\u201d into an opportunity to improve them and optimize your entire Supply Chain by following the Diagma view described below.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\" \/>\n<meta property=\"og:site_name\" content=\"Diagma\" \/>\n<meta property=\"article:published_time\" content=\"2022-01-13T18:36:11+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-01-13T18:38:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/diagma.com\/wp-content\/uploads\/2021\/04\/shutterstock_742480075-1024x683.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"683\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Florian Cabanne\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Florian Cabanne\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\"},\"author\":{\"name\":\"Florian Cabanne\",\"@id\":\"https:\/\/diagma.com\/#\/schema\/person\/2f79023b10b7386f64dd2e3fef01d36a\"},\"headline\":\"TAKE ADVANTAGE OF \u201cPOOR QUALITY\u201d FORECASTS\",\"datePublished\":\"2022-01-13T18:36:11+00:00\",\"dateModified\":\"2022-01-13T18:38:12+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\"},\"wordCount\":563,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/diagma.com\/#organization\"},\"image\":{\"@id\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/diagma.com\/wp-content\/uploads\/2021\/04\/shutterstock_742480075.jpg\",\"articleSection\":[\"Opinion\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\",\"url\":\"https:\/\/diagma.com\/en\/take-advantage-of-poor-quality-forecasts\/\",\"name\":\"TAKE ADVANTAGE OF \u201cPOOR QUALITY\u201d FORECASTS - 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