- Frequently, they aren’t forecasts at all; they are only guesses
- As W. Edwards Deming said, “Wherever there is fear, you will get wrong numbers.”
- Forecasts are not prophecy and were never intended to give the actual answer to, “How many units will be sold next month?”
- Forecasts are always based on assumptions and frequently the assumptions are wrong
- Forecasts attempt to predict variable behavior into the future
- Forecasts cannot take into consideration every potential variable that might affect the result for two reasons: a) we don’t know all the variables, and b) even if we did, there isn’t enough computing power in the universe to take them all into consideration
- Forecasts almost always are given as a single number (in the business context) when, in fact, they should be expressed (at a minimum) as a number and the standard deviation surrounding that number
- Many forecasts originate with salespeople
- The salesperson provided his “best guess” forecast
- The salesperson provided what he/she thought he/she could sell
- The salesperson provide a “safe number,” so that he/she can “hit her target”
- The salesperson provided an “average” calculated from who knows what—last year? last three months? extrapolated from last week?
- The salesperson provided a “big number” and will try to hit it because of pressure from sales management
- We try to forecast too far into the future—say, three months instead of three days
- The forecast is based on the assumption that—except for the things we specifically know will change—everything else will remain the same (but it never does)
- Our suppliers’ lead times are unreliable, so we don’t know the actual period our forecast needs to cover
- We forgot to carry the 2 when doing the math
- Our Excel™ spreadsheet formulas and references are off, but we haven’t noticed it yet
- Our forecasts for our finished goods are pretty good, but when MRP blows down through our multi-level BOMs, the forecast explodes due to our minimum batch sizes, percent-over and other production policies
- Some departments just can’t get their homework done on time and we have to produce a number from somewhere
[Cross-posted a Kinaxis Supply Chain Community]
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