Stop chasing perfect forecasts
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Forecast accuracy is one of the most widely used measures in supply chain planning, it is also one of the most misunderstood.
In fact, we have seen organisations improve forecast accuracy while customer service falls, inventory increases and planners spend more time firefighting than ever before. How? Because forecast accuracy measures the quality of a prediction.
It does not measure the quality of a decision and if there is one thing every supply chain leader eventually learns, it is that all forecasts are wrong. There will always be some degree of forecast error because forecasting is, by definition, an attempt to predict an uncertain future, which means the question is not whether your forecast will be wrong, the question is what your organisation is designed to do when it is. That is where planning maturity separates itself.
The best planning organisations do not outperform because they somehow eliminate forecast error. They outperform because they understand how much error exists, what impact it creates and how to respond before it becomes a customer service issue, an inventory problem or a balance sheet concern.
The forecast itself is only the beginning of the conversation, what happens next is where value is created.
The pursuit of forecast accuracy can become a distraction
Supply chain leaders are often under pressure to improve forecast accuracy year after year, yet some of the highest-performing supply chains are not necessarily those with the most accurate forecasts. They are the ones that have built processes capable of absorbing forecast error.
This is because customers are not measuring your forecast, they are measuring whether you deliver on time and in full. Finance is also not measuring your forecast, they are measuring the inventory and working capital sitting on the balance sheet. Operations aren’t either, because they just want to see whether they can execute effectively.
A forecast only has value if it helps the organisation make better decisions, and that is where the conversation often needs to move.
The danger of relying on lagging measures
When organisations discuss supply chain performance, the same metrics frequently appear.
- OTIF.
- Service levels.
- Inventory value.
- Stock turns.
These are all important, should be measured, but they share the same limitation. They are lagging indicators and only tell you what happened, not what is going to happen. By the time:
- Inventory has increased, the inventory has already been purchased.
- Service levels start falling, the customer impact has already occurred.
- OTIF is trending downwards, the supply chain issue is already in motion.
The challenge for planning leaders is identifying problems before they become outcomes and that requires looking beyond traditional performance measures.
The organisations that perform best focus on leading indicators
At Bedford, one of the patterns we consistently see across successful planning transformations is a shift away from monitoring outcomes alone. Instead, organisations begin monitoring the drivers of those outcomes.
Rather than asking: “What is our inventory value?”
They ask: “What decisions are we making today that will influence inventory next month?”
Rather than asking: “Did we achieve our OTIF target?”
They ask: “Can we already see the risks that will affect future service levels?”
This subtle difference, is what changes everything and takes you from explaining yesterday to influencing tomorrow.
Forecasts do not create value, decisions do.
A forecast is simply an input into a decision-making process; the value comes from what the organisation does with that information.
For example, there were two businesses with identical forecast accuracy, but the first can model inventory impacts, assess supply constraints and evaluate multiple scenarios before making decisions. Whilst the second relies on spreadsheets, disconnected systems and reactive planning processes, their forecast accuracy could still be identical, but their business outcomes will not be.
This is why we often challenge organisations that focus too heavily on accuracy measures alone. Improving forecast accuracy by a few percentage points may generate less value than improving the quality and speed of decision-making across the planning process.
The forecast is important, but the decision it enables is far more significant.
Why inventory matters more than many organisations realise
If forecasts are inherently uncertain, businesses need a way of protecting customer service against that uncertainty. That protection often comes in the form of inventory. Safety stock exists because forecast error exists, the question is whether inventory is being managed deliberately or simply accumulating as a by-product of poor planning.
Many organisations struggle to understand the relationship between forecast error, inventory strategy and service performance, as a result, inventory becomes either too high or too low. Too much inventory creates cost, working capital pressure and inefficiency. Too little inventory creates service failures and operational disruption. The objective is not eliminating forecast error, but to build a planning process capable of responding to it appropriately.
What maturity looks like
The most mature planning organisations accept a reality that others spend years fighting. Instead of chasing perfect forecasts, they focus on resilience. They create planning environments that help the business understand trade-offs before decisions are made.
- Connecting demand, supply, inventory and financial planning.
- Using scenario modelling to test assumptions.
- Identifying risks before those risks appear in operational metrics.
- Understanding that planning success is not measured by the quality of a prediction, but by the quality of the decisions that follow.
The real opportunity sits in creating a planning capability that can absorb uncertainty without creating disruption.
Our view
Forecast accuracy deserves attention, but it needs context. A highly accurate forecast does not automatically create a high-performing supply chain. What matters is how effectively your organisation responds when the forecast is wrong, because it will be wrong.
The organisations creating competitive advantage are not those chasing perfect forecasts, they are the ones building planning capabilities that can absorb error, anticipate risk and make better decisions before problems become outcomes.
Ultimately, planning is not about predicting the future, it is about being prepared for it.
What to read and do next
Read the previous article
The Bullwhip Effect Is Costing More Than You Think
Discover why small forecast changes can create disproportionate impacts across inventory, production, logistics and working capital, and why the issue is often a symptom of planning maturity rather than demand volatility.
Next in the series
Planning by exception: The difference between reacting and leading
The best planners don’t spend their time watching every number. They focus on the signals that drive decisions. Discover how planning by exception helps teams move faster and make smarter choices.
Our Anaplan Value Check takes two minutes and ten questions. It assesses the strength of your planning foundations, shows you where the gaps are, and gives you a practical view of what to address first.
