How many times have you heard the following complaints at your company:

• We wouldn’t have stocked-out if the forecast had been right!

• We wouldn’t have all of this obsolete inventory if the forecast had been right!

• Why do we always have inventory that we don’t need, and run out of inventory that we do need?

One thing we quickly learn about forecasting is that it is a very inexact science. Is there a better way?

Yes there is, and I call it collaborating with your customers. First, conduct an ABC analysis of your customers. Most manufacturing & distribution companies discover that between 60% – 85% of their revenue come from 15% – 25% of their customer – these are your key customers.

By forming a partnership with certain key customers, you can simultaneously improve your customer service while reducing your inventory. When a FMCG (fast moving consumer goods) company initiated a collaboration program with its key customers, it was able to improve its on-time deliver from 75% to 98% in 6 months, while reducing its inventory. That is what I call a real win-win!