Tuesday, November 5, 2013

Does the forecast HAVE to end up on the finished product?

All too often I see companies using strategy 40 for the finished product and then the forecast ends up as a VSF in every FERT's MD04 and the demand for all lower level BoM items comes from the finished goods. I find this a rather ineffective, cumbersome and downright costly way of planning... especially in the Process Industries where there's a V shaped BoM structure (much more finished product's variety than there are raw materials).

We all know that the forecast is always wrong. So if you forecast 10 liter bottles separately from 5 liter bottles that contain the same liquid, you are exponentially compounding that error when you hand it through to the bulk level.

How about forecasting and pre-manufacturing the liquid (bulk) to inventory and filling it into the bottle as the customer is asking for it?

I am aware that this sounds too easy and isn't practical everywhere. At least you can think about it and take another point of view. Who knows... It might make a big positive difference and may be worth a try