Inaccurate supply chain forecasts can be costly. In 2002, Cisco was forced into a $2.2 billion inventory write-off after it had overestimated demand for network equipment during the dotcom bubble. While the typical manufacturing organization will never run the risk of such a huge write down, there's still the possibility of a missed forecast straining its finances.

Why missed forecasts are so painful

Inaccuracies can hurt manufacturers in multiple ways:

• Overestimating demand will result in excessive inventory that consumes storage space and cuts into profit margins by necessitating big discounts to move.
• Underestimating will lead to shortages, which will frustrate customers. These stockouts may also require increased spending on expedited replenishment.

Striking the right balance between overstocking and understocking isn't easy, or else no one would struggle with the above (very common) issues. However, there are steps that many manufacturers can take to reduce the risk of unexpected carrying costs and stockouts, including the implementation of modern ERP technology.

ERP solutions help forecast manufacturing demand.

How ERP solutions support more accurate forecasting and production

Since many manufacturers operate within just-in-time or made-to-order paradigms, the impact of an inaccurate forecast is particularly severe. Fortunately, ERPs deliver much-needed protection by:

• Integrating up-to-date information from back office applications like CRMs.
• Estimating lead times and material availability.
• Offering insight into projected income, spending and changes in costs.
• Providing data that can inform tasks such as job scheduling.
• Giving teams a consolidated interface for managing inventory.
• Streamlining logistics with real-time information on distribution and transportation.
• Flagging operational efficiencies in real time and performing cost accounting.

Overall, a modern manufacturing ERP offers a substantial upgrade over other methods used for this purpose, such as relying on spreadsheets or custom in-house applications. Both of those solutions require a lot of manual effort, which is as time-consuming as it is error-prone.

Plus, relying on discrete Excel sheets or apps has the potential to create data silos, meaning there's no single version of the truth that everyone can rely upon when making decisions about production. Silos increase the chances of a costly stockout or inventory excess. In contrast, ERP gives you a consistent flow of data from the shop floor to the back office.

As you consider ERP options for your manufacturing organization, reach out to the experienced team at Accent Software. We can help you find the solution that meets your exact requirements and ensures you can adequately forecast demand.