06 Oct 2011

SKU level forecasting or aggregate planning - the case for S&OP

SKU Level ForecastingSKU Level Forecasting

Talk to any supply planner, they will say they need a forecast at the SKU level.  The more detail the better.

So the demand planner is on the defensive, he needs to forecast at the most granular level to satisfy the demands of the supply chain.  Create and deliver a demand forecast at the SKU/location and sometimes at the SKU/customer/location level.  But the more detail you get, the more noisy the data gets and it becomes impossible to create good statistical models at that level.

It is important to have a software package  that allows you to get the forecast at that level.  However, analyzing, reviewing and consensing at that level has its perils.  Living too much at the detail level will definitely trap you from getting to the important challenges of the business and resolve true exceptions.

Looking at aggregate numbers for review and consensus among stakeholders leads to the Sales and Operations Planning process.  Truly balancing Supply and demand at the aggregate level will result in driving the stakeholders to understand the true business problems.

Is demand equal to what we can supply?

Can we answer this question at the product family or sub-family level first?  If not, can we smooth production so we build inventory to get ready for the peak demand?

If the answer is yes, then look at major MRP or schedule exceptions.  But these should be addressed internally in preparation to the S&OP meeting.  This is not a major S&OP decision.

Let us discuss more in a couple of weeks in Princeton, NJ.


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