Companies must strike a balance between getting the forecast right and being agile enough to respond when it's wrong. Lentz says the industry hasn't seen much improvement on the forecasting side, with companies achieving an average accuracy rate of 40 percent. Through hedging and buffer inventories, a supplier might push that number to 60 or 70 percent, although that level of accuracy has yet to be achieved with many customers. The sales and operation planning (S&OP) process continues to be "disjointed" in a lot of organizations, he says.
As a distributor, Avnet has had somewhat better success than most companies, Lentz says, aided by an S&OP process that's tied to new information-systems technology. The company uses its traditional historical and customer forecasts to manage the mature components within its supply chain. In addition, more sophisticated enterprise resource planning and other execution-based systems have resulted in somewhat better performance in demand forecasting. "There's a better awareness," he says.
"Information is flowing faster and deeper up and down the supply chain."
Benchmarking can be another important tool in improving demand planning. Avnet draws on the Supply Chain Operations Reference (SCOR) model as a basis for establishing performance metrics. Making things more complicated is the trend toward shorter product lifecycles, which tend to shrink during economic downturns.
For the future, Lentz sees the cloud as playing a bigger role in delivering IT systems and helping companies to integrate various data sources. "I'm bullish about the cloud," he says, calling it an opportunity for "getting it right for our customers."
