Richard J. Sherman, president of Gold & Domas Research, recently wrote an article for the Council of Supply Chain Management Professionals (CSCMP) quarterly magazine called "Why has CPFR failed to scale?"

Toward the end of the article, he revealed "Sherman's Law of Forecast Accuracy" (I like to call it the Myth of Large Numbers, but Sherman summed it up with superb succinctness and elegance):

"Sherman's Law of Forecast Accuracy states: Forecast accuracy improves in direct correlation to its distance from usefulness."

In the same article, he also states:

Knowing what the store will order is easy. For the most part, they will order the pack-out case quantity. The real challenge is determining, based on rate of sales, when the store will reorder.

André Martin, who pioneered the distribution resource planning (DRP) system, likes to call this "flowcasting." But even before he coined the term, Martin had always stated that the only point of uncertainty was at the point of sale and that all other requirements upstream can be calculated.

André is right! Manufacturers should stop trying to forecast what will be sold at each point of sale.

To read the article in its entirety, current CSCMP members can link to it directly by clicking here and logging in. To subscribe to CSCMP's quarterly magazine, click here. To become a full member of CSCMP (which inlcudes a complimentary subscription and access to loads of other resoureces and materials) click here.