SCDigest
Editorial Staff
SCDigest Says: |
Some companies spend too much time trying to improve forecast accuracy on products that aren’t big drivers of sales and profits.
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Across the globe, companies are working hard to improve forecasting processes. But progress is often slow, because so many factors are working today to make demand planning more challenging than ever. Those challenges include SKU proliferation, shorter product lifecycles, global market coverage, reduced customer loyalty, channel complexity, etc.
In a recent column for the Wall Street Journal, Dr. Chaman Jain of St John’s University and Mark Covas of Procter & Gamble offer seven keys to achieving improved forecasting results, with a big focus on collaboration, as we summarize below.
1. Get Senior Executives Involved: No surprise here, as this tops every list of key success factors for everything. One smart idea, however, is to quantify the financial impact of even a 1 percent point increase in forecasting accuracy – or a 10-point improvement. That can quickly get CEO, COO or CFO attention.
2. Explain the Mutual Benefits: True internal or external collaboration will almost always be impossible unless the other parties can also see what’s in it for them, which forecasting managers too often forget. Ocean Spray managers, for example, obtained much greater input from Sales in the forecasting process after they explained how that effort would result in improved inventory planning and fewer stocks outs – which cost the sales people commission and could put an entire account at risk.
3. Clearly Define Goals and Agreements: Efforts to improve forecasting will falter if the better demand plans can’t be translated into clear bottom line benefits. Procter & Gamble, for example, focuses on inventory management, both within the company and at the store level in terms of stock outs. It is important to get input on these metrics and the targeted goals from multiple areas of the company, Jain and Covas say, both obtain a 360-degree view of the issues and to ensure expectations of what improved forecasting can achieve are realistically set.
Setting those metrics and goals can be even harder with trading partners – meaning the effort to define those plans is even more important. Jones Apparel, for example, has several different levels of “collaboration” with retailers, which involve distinct levels of collaboration and information sharing.
(Supply Chain Trends and Issues Article - Continued Below)
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