FOCUS: Product Forecasting Improvements
A study conducted showed that the accuracy of forecasts submitted to the product planning group was very low. As a result, the organization had serious problems with shipments and backlogs. Revenue targets were not being met.
A Lean Six Sigma project was launched in the organization to improve the Supply/Demand process for the most critical product family. The goal was to increase forecast accuracy to targeted levels and to improve revenue figures and reduce inventory. The team identified the following solutions to address root causes:
– Developed a form which included the main source of data for analysis, i.e., historical forecast, statistical forecast, orders placed and invoiced, sell-outs and stock information.
– Implemented a decentralized preparation scheme for Supply/Demand forecasts.
– Created a reference guide and conducted training for key staff members in the Operating Companies.
– Introduced new forecast accuracy calculation methods with allowed and changeable limits.
– Included adjusted forecast targets in the Product Managers’ performance objectives/compensation.
As a result of this project, the service company received over $2 million in incremental revenue. In addition, forecast accuracy improvements have helped reduce inventory and simplify employee work processes.
* Due to nondisclosure agreements, the organization referenced in this example cannot be disclosed.