Riots in the streets, stock markets yo-yoing, currencies in free fall, credit ratings being hit – and all to the backdrop of politicians trying to pass the buck and hope that the problems go away.
With so much uncertainty you might therefore be unsurprised to learn that more and more companies are investing in sales forecasting systems in the hope that this will cast some light on what customers are going to buy. But can a sales forecasting system cope with the levels of market volatility we are currently experiencing? The answer of course is no. Sales forecasting systems to a large degree work on the assumption that the past is a guide to the future, and yet nothing from the past could have predicted what is happening at the moment. Of course there are many stable products out there – bread and milk, white tee shirts etc. – and these are easier to forecast. But many other products are simply not forecastable.
So what can you do? Well by all means have a go at forecasting. But shorter, faster responding supply chains are a much better solution. Have a look at your own supply chain, pick a selection of items or materials and ask yourself how flexible your supply chain is and how quickly it could respond to changing demands – either up or down. If it’s not very flexible think about what you could do to make it more so. For example:
- Look at different shipping methods
- Make sure you understand your supplier’s price break points – could you buy less and still get the deal?
- Could having alternative sources of supply give more options?
- Is there someone out there that is hungrier for your business?
In all cases make sure you consider the total supply chain cost of the product. Buying in bulk may not be as cheap as you think when you factor in the warehousing and markdown/disposal cost of excess stock. And buying smaller quantities from a closer, more responsive supplier may help you to react more quickly to changing market demands – demands that may not have been prophesied by your forecasting system.
If you need help streamlining your supply chain, or would like some ideas on how to improve its responsiveness, talk to The Logistics Business.