FAI – Meridion

In conversations between customer and supplier in the automotive industry, it is often discussed how forecasts vary over time. The oscillations are often large and difficult to measure. Do you recognize it? Imagine a standardized tool for forecast variation that allows everyone to come to the meeting with exactly the same picture of the situation. This is possible through the Odette Forecast Accuracy Index (FAI)!

FAI is a measure developed in a recommendation by the trade association Odette. Together with this recommendation, there is an application built in the decision support tool QlikView which is free for members of Odette.

Two key figures are presented in the recommendation from Odette (LG07):

FAI – a percentage of how accurate a forecast is for a given demand period
WTS – an index that describes the type of imperfect forecasts – whether the forecasts are generally above or below actual demand

Get started!

For members of Odette, it is free to get started with FAI. Read more and order at http://www.odette.se/it-tjanster/odette-fai-forecast-accuracy-analyzer

Meridion has built the application together with Odette and has extensive experience in implementing the application in the business. Getting started with FAI is quick and we of course help in a cost-effective way. The implementation time is calculated in hours rather than days.

Improvement work

The following problems are common in connection with forecast information:

Lack of information and transparency in the supply chain results in consequences such as “the Bullwhip effect” (https://en.wikipedia.org/wiki/Bullwhip_effect)
The quality of forecast information is low and there is a lack of standardized KPIs to support analysis and communication
Global supply and long lead times exacerbate the problems as needs change with short notice
Suppliers are forced to increase safety inventories or have overcapacity to parry for unexpected rises in demand

Improving forecast quality can positively affect a company from many perspectives, here illustrated by the so-called “3-CEP model”:

References

The roll-out of Odette FAI has started and new installations are taking place at a high pace.

Below is a selection of customers who have installed the solution. Feel free to contact Meridion to discuss your issues directly with any of these companies: