You can't hedge against rising commodity prices, work successfully with contract manufacturers or excel in so many other areas without forecast accuracy. Lora Cecere, industry analyst with the Altimeter Group, explains how to benchmark against companies that have mastered the art, and lists five drivers of forecast excellence and the seven sins of the process.
With commodity prices going up, with unrelenting demands to maintain growth and with the need to continually introduce new products, forecasting matters more than ever, says Cecere. In addition, supply chains are much longer today, capacity may go to the highest bidder and contract manufacturers often base their pricing on the accuracy of one's forecasting. "So, you really can't play today."
Does benchmarking against acknowledged leaders guarantee success? Well, it helps, but of course you have to measure yourself against a like company, one with a supply chain or supply chains much like yours.
There are five factors that help: You have to have leadership that is every bit as committed as executives are at the company you're patterning after. Second, to drive forecast improvement, you need to implement forecast value-added analysis. That's a continuous program, not just a one-time project. Three, understand what is driving your market and determine how to stay in touch with that. Four, educate your executives, many of whom "grew up" when supply chain planning was in its infancy and haven't kept up with its advances. And five, you have to "own" the entire forecast. You have to consider not just production, but pricing, promotions, product launch and other factors.
Cecere outlines what she refers to as the seven sins of demand planning. The first is the failure to forecast what you should sell. Two, not being careful enough to implement forecasting as part of the demand plan. Three, not having accountability in your processes. Four, failing to ensure that prospective partners indeed have the capability to collaborate and not just the aspiration. Five, not matching the rhythm of your forecasting with the rhythm of your supply chain. Six, failing to fully use your system, including forecast valued-added analysis. And finally, the "most deadly" sin is not believing in forecasting.
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