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  • Duncan McLeod

Roughly Accurate or Precisely Wrong – How to deal with S&OP Forecast Error

Updated: Nov 17, 2022


This journal article follows up on my April 2016 article If You Can’t Measure It, You Can’t Manage it! In that article I reviewed the mechanics of setting tolerances and measuring performance to plan for the Booking Plan, Shipment Plan and Supply Plan. Using these measurements as a starting point, I will go through the importance of accuracy rather than precision and then take a quick look at the impact of variations that are within tolerance

I have written this article as a story drawing on two of the principle characters from my book “Sales and Operations Planning – How to Run an S&OP Process that Everyone Understands”. Jim, the CEO of ToyAuto, is currently implementing S&OP. Doug the consultant is coaching him on his journey. This story takes place in Jim’s office. Jim’s son Billy makes a cameo appearance. Hope you enjoy it as much as I enjoyed spending time with these characters again.

Duncan

 

For a printable version of this document: click here

Scene: Jim’s Office. Jim and Doug are sitting at a table and reviewing his monthly S&OP plan.

Jim – Doug you said we need to get the plan roughly accurate rather than precisely wrong. I’m not sure I get the difference between accurate and precise.

Doug – Your son Billy still plays hockey doesn’t he?


Accurate is Putting the Puck in the Net!

Jim – Not just play, he eats, drinks and sleeps hockey.

Doug – Well let’s use a hockey analogy then. The net is 4 feet high and 6 feet wide, measured on the inside of the pipes by the way. The posts are 2 and 3/8 inches in diameter.

Jim – OK, if you say so.

Doug – Let’s say Billy is practicing his shot. If he continuously rings the puck of the left post we would say he is precise, he always puts the shot in the same place, even though he doesn’t score. On the other hand if he puts the puck anywhere inside for the 4 x 6 foot area that is the net we would say he is accurate, he scores.