Are Your Logistics Costs Out of Line?

This cost breakdown can be used for an initial assessment. Since each company allocates costs differently, these breakdowns should be used with care. If costs in an area are 30% or 40% more than the norm shown below, than that indicates that the area deserves a closer look.

Does Your Inventory Support the Projected Sales?

One effective measure of inventory health is the percentage of existing inventory that will be consumed by the forecast, orders, and planned production in the next 30 days. This metric can account for product substitutions, and the ability to move material between one location and another.World class supply chains operate at an inventory velocity that is in excess of 75%

How Accurate is Your Forecast?

Forecast errors generally increases further out into the future. The table below provides some clues as to the forecast error experienced at the SKU level. If your forecast errors are much greater than these at the SKU level, there is significant opportunity for improvement.

Table extracted from Benchmarking Forecasting Errors; by Chaman L Jain - The Journal of Business Forecasting, Winter 2005 -2006.

Extracting Value from Supply Chain Improvements

What is the Impact of Improving Forecast Accuracy?

An improvement in forecast accuracy can reduce inventories and costs dramatically. Dr. Chaman L. Jain of the Institute of Business Forecasting has developed a simple and effective way of measuring the impact of forecast improvements (Dr. Chaman L Jain, St. John's University, Jainc@Stjohns.edu). Based on his ideas, we have created a spreadsheet that can be used to gauge the impact of forecast improvements. The following table details savings for some sample companies:

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