We’ve all been there. The speaker is providing way too much detail. “Just get to the point!”
What’s the right amount of information?
In forecasting demand and supply, there really is a point of TMI (too much information). Detailed forecasting can be counter-productive. It requires more effort to forecast at a detailed product mix level than at a volume level. Similarly, detailed capacity planning requires more effort than rough cut planning. So where should we draw the line?
The planning horizon dictates the appropriate timeframes for mix versus volume planning. The planning horizon is defined as the period of time needed to purchase and receive raw materials plus the manufacturing time needed to produce finished goods. Within the planning horizon, detailed forecasts and plans are needed by the Operations side of the business to produce the right products in the right quantities at the right times.
Beyond the planning horizon, who needs the details? Nobody. So why are so many companies forecasting in detail so far out? Because they can. Planning tools enable detailed forecasting and easy aggregation well into the future. Yet, this technological capability should not lead to the conclusion that more detail is better. If nobody needs the detail, it is wasteful to dedicate the additional effort to plan across a greater number of items.
The solution is to plan at mix detail inside the time fence and at volume level outside the fence. A good S&OP demand forecasting and planning system should make it easy to plan at appropriate levels across products, customers, geographies AND time periods.
