Many inventory and production planners rely heavily on a sales forecast as the foundation to their inventory planning and MRP process. In fact, an accurate forecast is one of the three keys to MRP success, the other two being accurate Bills of Materials and accurate inventory balances. The only problem is that accurate forecasts are an oxymoron at best, and at worst, sales doesn’t produce one at all. So what does the planner do? I say, make one up.
Making a Plan in the Absence of an Accurate Forecast
Wait, do I really mean just make one up out of the blue? Of course not. There are three approaches to developing an accurate plan when a forecast is not available.
1. Go talk to sales.
Now I know that seems to be dangerous ground, but sales really does have the best interest of the customer in mind, and if they can help provide the means to ship on time, it is in their best interest. Go talk to them and see what the market is doing. See if it is possible to get forecasts from key customers, and get at least an estimate as to whether sales levels will be growing this year and by how much.
2. Take a look at the past.
History will tell you a lot about sales flow, whether there are spikes or seasonal demand, and how much growth there has been. A simple stacked line graph of the past 36 months revenue will tell you a lot about sales history.
3. Establish flexibility.
It is your job to ship on time, regardless of the quality of the inputs you have. Therefore, if you don’t have a forecast, you need to develop flexibility in the supply chain so you can respond to the surprises that come your way. Having short supplier lead times, flexible production or warehouse operations, and the ability to flex your labor using temps and overtime all contribute to flexibility.
For more on managing labor for maximum flexibility, check out my podcast here.
Go With Your Instincts
Finally, you can use a dash of professional gut feel to finalize your plan. You see the day-by-day goings on and your key team members will have input that can help you. If you make up a forecast, I would expect it to be pretty close to what actually happens. That, along with communication with sales, a look at history, and flexible supply chains will result in the plan that can provide a high level of customer service.
© 2011 – Rick Pay – All Rights Reserved
