A $1 billion, 3,000 employee worldwide division of a mineral drilling manufacturer with three manufacturing locations and 26 field sales locations needed to improve forecasting and inventory turns. Phase one of the project was to improve sales-demand forecasting in North America to:
- Improve forecast accuracy
- Increase forecast coverage from 25% to 70% of COGS
- Increase frequency of forecasting from quarterly to weekly
Flow Consulting conducted a 3.5 day Lean Business Process kaizen using data that had been gathered ahead of time. The team consisted of cross-functional representation from Finance, Operations and Sales.
The kaizen identified the following improvements to achieve the stated goals:
- Creation of a part number hierarchy focused on how customers order to enable more frequent forecasting on fewer line items, but increased product coverage.
- Development of site-specific forecasting templates to allow all 26 sites to forecast their top 70% of COGS vs. some sites not providing forecasts at all.
- Development and formalization of policies and procedures to ensure proper use of forecast drivers by all sites in SAP to improve accuracy and avoid shipping items even when demand had shifted.
- Formalization of the forecasting process to identify who needs what information on a weekly, monthly and quarterly basis to capture and communicate forecast information to sales, operations/manufacturing and finance.