Wednesday, March 03, 2010

Eliminating Forecasts

Just-in-Time pull-based inventory management was a great idea when it first became fashionable – and it still saves companies millions of dollars.

But more than a technology or a business process, JIT is about eliminating the need for forecasts.

Consider: If we could forecast exactly how and when each specific item in our supply chain will be sold with 100% accuracy, we will not need a pull-based system. Since we know our forecasts cannot be accurate, we attack the problem from the other direction and try to minimize the need for inventory – and hence forecasting – in the first place.

I was reminded of this while reading an article in the Economist about publishing books-on-demand. As the article explains: “Estimating the demand and thus the print run for a book has been a guessing game since Gutenberg’s day. This means that the industry’s supply chain is exceedingly wasteful. About 30% of books in America are returned to the publisher.”

I love the way the forecasting problem is being addressed not just by improving forecasting techniques, but by improving delivery mechanisms to the point where forecasts become unnecessary.

As they say, sometimes the best defense is not to be there…..

1 comment:

  1. I agree....so the works of the surveyor is really important...but unfortunately they ask the wrong question....and so they reported it wrongly.....
    and they do surveying for the benifit of official duty.....huh...

    In my country they survey the % of unemployed...
    the only unemployed reported was the people who cannot work because of health...and the people who don't really work....
    and those people who are applying but not yet employed...and those people who seek jobs but cannot get any.....is not considered unemployed...
    senseless....and so with regards to poverty...imagine they will report that the citizen is never hungry...when the actual report is not....

    government really pursued what the people wants to see and what they want people to see...just to save their @sssessss...

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