If you only look at one demand forecasting metric ever, it should be demand deviation.
As you’ll see in this video tutorial, demand deviation is the #1 value influencing your profitability.
Take a look at some of the most successful and strategic supply chain planning professionals in the world, and you’ll see a common trend. They all keep a relentless watch on demand deviation in relation to:
- Safety stock needed and
- Desired service levels
Those two relational inputs, when analyzed together across a large number of items – from super steady to highly erratic – tell the most important story about your profit picture. For example,
- Where should you invest in safety stock (and where shouldn’t you)?
- How do your margins play-in?
- Where are you losing – or making – money?
- How does demand deviation define safety stock requirements?
- Why is it pointless to add new SKUs if you’re never subtracting unprofitable ones?
Related podcast: “10 Inventory Numbers Every Exec Should Care About”