Many companies plan their finished goods, intermediate items or raw materials based on demand forecast, which indeed is a challenging task. While many of them use naive methods like past x months’ average, few have graduated to using statistical forecasting methods available in their ERP systems. However, this is not enough.
Accuracy of statistical forecasts depends on the selection of the right method which is governed by demand data pattern for each SKU e.g. trend, seasonality, frequency, variability etc. For a given method the accuracy also depends on the selection of forecasting parameters e.g. number of months whose demand is averaged, weights given to different periods, smoothing factors, seasonality indices etc. factors. Given the large number of SKUs and locations it becomes very difficult to analyze and implement these methods and parameters even for seasoned, and highly skilled forecasters.
DFaaS creates significant value for Solvop’s clients by providing superior forecasts which serve as the backbone of the planning process. While some understanding of business operations is required to create optimal forecasts, the process is largely data driven.
Solvops’ DFaaS enables companies to leverage external expertise who have access to sophisticated forecasting methods and optimization tools to develop rigorous forecasts. When a DFaaS provider generates the forecasts, the firm’s business leaders and planners are able to focus on their top priority, running the business.
Whether performed internally or with external help, forecasting remains a critical capability which companies can’t afford to get wrong. Solvop’s expert forecasting teams have identified techniques for improving forecast accuracy from 5% to 25% through robust analytics. An example below illustrates the same.
Forecast Accuracy Improvement