I joined a discussion a couple weeks ago and generated a bit of a firestorm.  Someone posted a question about how forecasting helps you become lean. It’s one of my hot buttons, so I couldn’t help myself.   The best characterization I’ve heard for forecasting is that it’s either ‘lucky’ or ‘lousy’.  I don’t remember where I first heard it, so I must apologize for not being able to properly throw credit for this gem.  In all the lean training and literature I’ve been through, I can’t recollect a mention of ‘Forecasting’ being on the critical yet never ending path to ‘The Goal’.

Forecasting is nothing more than an educated guess.  Until the day that lead-times all go to zero and the supply chain response is infinite, forecasting is a necessary evil.  Obviously, the more resources that have to be committed prior to receiving an offsetting commitment from a customer, the higher the exposure and forecasting becomes increasingly important.  As lead times decline and responsiveness increases, the forecast becomes less important, but the necessity for it will never completely go away.

 The goal should be to be able to effectively satisfy customer demands despite greater and greater deviations between foretasted and actual demand levels.  The only way to do this is to reduce the lead time between customer ‘stimulus’ (pull) to supply chain ‘response’.  The companies that are on the real road to lean understand this and the ones are trying to take the back alley short cuts do not.

Are you taking lead-time as a given?  Do your suppliers embrace lean and tools like SMED, small lot production etc? Are you buying mostly on price and not total cost?  Are you buying in volume and taking the discounts when smaller quantities may be better for both you and the supplier – so they can serve you and their other customers?  I’ve seen all too often when a volume discount was based more on the incentives for the salesman than on the physics and logistics of the transformation.

 If I can draw a correlation between the discussion activity centered on forecasting vs. lead-time reduction, collectively we’re not spending enough on the latter. Effort spent on forecasting today must be re-spent on it tomorrow.  A lead-time reduction improves your ability to serve the customer for time eternal moving forward. Spending a bit more time here will pay huge dividends down the road.

 

One Response to Forecasting Helping You Get Lean?

  1. Rick K says:

    Hey Wally,

    Seems like the lead time discussion is spot on especially total given the costs associated with the financing of WIP inventory.

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