1. Improved demand management, order promising and master scheduling capabilities. With closer links to the customers, they frequently can deal more with specific customer demand and rely less on purely forecasted projections.
2. Reduced lead times. Shorter lead times are one of the most important parts of running a manufacturing business well. The shorter the lead time—to enter the customer orders, to make the product, to buy the material—the less vulnerable a company is to forecast error. Consequently, the company is better able to ship what the customers want, when they want it. And isn’t that what it’s all about?
3. The ability to forecast at a higher level. A growing number of companies have found it really isn’t necessary to do lots of forecasting at the individual item or stockkeeping unit (SKU) level. Rather, through the intelligent use of planning bills of material, they can forecast higher in the product structure. When Widget Model #123 comes in six different colors, all of which are applied in the finishing Data Integrity 215 operation, is it really necessary to forecast all six colors of Model
#123? Probably not. Rather, whenever possible, forecast at the model level; this means one forecast rather than six. The law of large numbers will also apply—the one-model forecast will almost always be more accurate than the individual forecasts for each of the SKUs. Finish and paint to the customer orders as they’re received. And the planning bills of material will be there to help them not run out of the different colors of paint.