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Is monthly forecasting a must for Supply Chains?
Monthly forecasting is often seen as sacrosanct and a must for the entire supply chain planning and execution. Is it overhyped? Do we need to move out of it? Should we restrict its use to only certain aspects of planning? The views are highly polarised.
Let’s start with resource planning, like production capacity, vendor capacities, cash and manpower. Monthly cadence of planning and review does provide a good guidance on the protective capacity available with these resources. If a resource is getting closer to full utilisation, we can certainly look at debottlenecking it, well in time.
How about stock deployment, production scheduling and vendor deliveries? Basing these on monthly plans is fraught with danger. Consumer demand keeps evolving, the forecast done weeks ago will be out-of-date for such executions. What we need for supply execution is Demand Sensing, an updated view of the current demand patterns and their impact on near term demand.
It is prudent to restrict monthly planning output to only resource planning and refrain from using it for day-to-day execution.