Forecast Accuracy Improvement and Impact on Inventory Savings
The operations KPIs focus on service levels and inventory days on hand; and planning KPIs are still an afterthought in many organizations. For our typical planning diagnostics or APS tool implementation project, quite often our prospective clients asks us – “What is the ROI of this project?”
ROI for a strategic projects is twofold – qualitative (improving morale and providing advanced tool sets and best practices for team members) and the other is quantitative. In the following dashboard, we have presented a view of the impact of forecast accuracy on inventory savings. Insufficient demand communication can directly result in poor forecast accuracy and will have wider impact on planning resulting in supply chain shocks. This could result in not having the right inventory at right time.
Valtitude presents this easy to use dashboard for Supply Chain executives to compare their dollars saving with variation in forecast accuracy. This dashboard considers monthly revenue, lead time, forecast accuracy and service level as parameters to point out the inventory savings that can be achieved. It has sliders for you to set parameters that represents your current business case and compares it against a base case to give respective impact on inventory savings in dollars. It has two base case scenarios where one is with respect to 90% Customer Service Level and other is for 95% Customer Service Level. For example on page 1 of the dashboard, you can notice 1% increase in forecast accuracy will result in 2% savings on inventories. saving is result of 1% increase in Forecast accuracy.