What This Article Covers
- Common Question: Why Does Our Product Database Look Like a Service Parts Database?
- Our Reaction
- The Rising Tide of Unforecastability
Due to constant pressure from marketing to grow the product database with new product introductions, demand histories are becoming increasingly intermittent.
Common Question: Why Does Our Product Database Look Like a Service Parts Database?
After analyzing many product databases from customers, it is apparent that companies are being saddled with “service parts” databases. This causes a basic mismatch between many forecasting and supply planning applications that are designed to work with non-intermittent demand histories.
This factors of product proliferation and increasing intermittency decrease the applicability of statistical forecasting methods and applications. All of this is in part hidden the fact that so few companies actually can calculate their forecast error at the product location combination. Secondly, with intermittent demand histories, the standard forecast error benchmarks cannot be applied.
- Seeing this rising tide of unforecastability at our customers, we built our error measurement tool with error measurements that can accept a large number of zeros in the demand history and or the forecast history.
- Secondly, we customized our dynamic safety stock so that it worked with intermittent demand forecast error. With rising intermittency, never before has their been such a large discrepancy between service level expectations and inventory levels. Our application shows the direct tradeoff between service levels and inventory levels, and the total inventory level, not merely the inventory level at a product location combination.