The desaster with unpredictable demands..

In our last lesson we heard about a classification with the parameters predictable/non predictable demand and stable/non stable processes (which you can see in the table below). This made me think about my previous working experience where I was responsible to send our suppliers forecasts of what our customer wants.

We had many projects regarding process improvements and saving of money. But these projects haven’t been really successful as this can only be realized when the processes are stable and when the demands are more or less predictable.

In my case, we worked very often like fire fighters, because of the heavily varying demand of our customer. Differences of more than 40% for the next month were normal whereas our suppliers need a reaction time of 3 months due to their lead times. You can see, this is getting complicated..

As this situation should not become routine in any company, we had to think about a solution. We were positioned in the right down corner of the table which is where you definitely do not want to be. To get out of there, we needed to stabilize our forecasting process. This was reached by introducing a safety stock for the most critical parts and by freezing a forecast time of 3 months with our suppliers. The next step was to make our customers (which are company internal) more aware of the lead times which we cannot change due to the complicated production processes.

In the end, we could solve our emergency problem with these “little” changes as our process became more stable. The total amount of escalations for this product decreased by more than 80% and therefore safed a lot of money (and a lot of my nerves).

In the end a short clip about excellent forecasting 🙂

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