Whether setting strategy or designing a SIOP (sales, inventory and operations planning) process, one of the most important questions to consider in forecasting is how far into the future will you look? And why?
As we think about whether the answer should be 1 month, 1 quarter or 1 year, check your thinking. When assessing the future it is important to think through the elements that may impact your forecast.
1. Do you have customer contracts in your business/ industry? If so, how far out do they go?
2. Regardless of the commitment level, how far out do you have information that is somewhat reliable? If it changes substantially from month-to-month, is it of any value?
3. How reliable is your forecast by product or customer grouping? Forget about items and sku-level forecasts. How about product category forecasts?
4. Do you have access to demand data into your supply chain?
5. Are you asking questions about what is coming down the pike? If not, why not?
6. How much cushion do you have? Do you have inventory or capacity availability?
7. How prepared is your supply chain? Can they handle volume spikes?
8. Are you willing to dedicate people to gain a view into the future? Why or why not?
9. Have you considered a strategic sprint? Why are you setting arbitrary time frames when customers don’t care what you do? They want what they need when they need it.
10. Are there downsides to looking too far into the future? What are they?
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