The goal of supply chain planning is to improve forecast accuracy and optimize inventory costs throughout the supply distribution network. Without proper planning, there is a chance of overstocking leading to high inventory costs or understocking leading to stock out situations causing revenue loss.
When a company produces more than the demand, the stock sits unsold in the
inventory. This increases the inventory holding cost, later leading to waste and
obsolescence costs. When a company produces less than the customer demand, there is a revenue loss and in today’s competitive business environment this might also lead to future revenue losses.
Getting demand forecasting accurate is the key to success in today’s supply chain
planning. There are various reasons why this demand-supply mismatch occurs and
forecasting accuracies drop. Customers’ needs and requirements constantly change, maybe due to: