I had the privilege of attending the Gartner Supply Chain Summit in Denver, Colorado, last month. Gartner put on a great conference with very informative presentations in both the plenary and breakout sessions. The food was excellent, and a wide range of technology companies were represented in the exhibition hall.
What I found most interesting, though, was a single message from Marko Pukkila, Research Director in the Gartner Supply Chain Research group, gave the keynote address that opened the conference.
A Surprising Insight
Marko provided a recap of recent Supply Chain trends and the key Gartner insights gained from their extensive client relationships.
As Marko highlighted, the number one challenge companies are facing is the lack of forecast accuracy and the resulting impact it has on supply chain performance. He described the enormous time and effort companies invest in the quest achieve accurate forecasts. His advice was quite simple – accept that your forecasts will be inaccurate and learn to work around the inherent inaccuracy.
I believe this is a critical message that companies need to follow. We should always be mindful of the law of diminishing returns as we seek improvements in supply chain performance. Trying to increase the accuracy of forecasts at the item level has become even more challenging with the acceleration of product proliferation.
But, while Marko was on target with advising clients to accept inaccurate forecasts, I felt he could have been more expansive in describing the techniques organizations can leverage to work around inaccurate forecasts.
This is where the simple elegance of Demand Driven MRP (DDMRP) can play such a critical role. DDMRP is a planning method that uses actual market consumption as the demand signal that triggers resupply. Actual demand will always be a more accurate signal than forecasted demand, and it provides a much more appropriate starting point in planning materials.
The DDMRP method is being adopted by an ever-increasing number of companies around the world. Countless success stories like those highlighted at this year’s Demand Driven World Conference in Amsterdam provide clear evidence that DDMRP is delivering significant supply chain improvements while dramatically reducing our customer’s dependence on forecast accuracy.
For example, one of our clients is Coca-Cola Beverages of Africa. Using DDMRP and our Replenishment+ solution, the organization has achieved impressive results. Click here to watch Barry Anderson, Demand & Supply Planning Specialist, talk about his results during his interview at the 2019 Demand Driven World conference.
So, abandon your search for a better crystal ball, and free up time in your organization by following Marko’s advice: Accept that forecasts will be inaccurate. Then, take a hard look at the improvements you can achieve through Replenishment+ and DDMRP.