Joe Eschenbrenner CPF, General Manager of Demand Management at The Timken Corporation, recently presented an extremely informative IBF Webinar entitled Organizational Alignment and Consensus: How to Engage All Functional Areas within the Forecast Development Process.

Joe’s amazing presentation focused on how demand planning professionals can engage functional areas within the forecast development process.  Joe explained in detail that this involves relating in the language of those functional areas, driving mutual accountability of both the piece and dollar forecast, and developing a definitive consensus with all those vested parties using the same base forecast information for decision making assumptions. 

As a follow up to his February 4th IBF webinar, Joe has gladly provided answers to the overwhelming number of questions that were submitted from participants during the webinar. If you would like to receive an emailed copy of his webinar presentation please feel free to contact us at the IBF at knowledge@ibf.org.

Q: How do you influence your Sales & Marketing people to look long term rather than the usual short term approach, as they are driven by targets and bonuses?

A: Our focus is currently 18 months. Sales and Marketing’s view may be shorter so Demand Planning drives the 6-18 month through statistics and standard forecasting best practices.

Q: What system software are you currently using for your forecasting needs?

A: Logility Voyager is our current software.

Q: For cost and value forecasting, is your module able to use time weighted forecasting to define different selling prices through your forecast horizon?

A: Yes. We have the option of a different price per each unit which in our case is months.

Q: Do you include Field Sales inputs? Any collaboration meetings with Customers?

A: Yes. However, our inputs are limited. We do have monthly key customer meetings chaired by our demand planning department.

Q: What are the biggest push backs you’ve had on your journey to forecasting alignment?

A: Change in general is the biggest push back at this time. However, due to the positive impacts of the solution the facts now help drive the results.

Q: Regarding the consensus meetings, do you find it easier to have consensus meetings per region and then compile to one global consensus meeting? Or do you organize only on global consensus meeting?

A: Yes, we find that the regional meetings work best for our teams, although smaller and more specific business groups can use the global consensus meeting approach..

Q: What is your typical accuracy at a product category level?

A: At a product group we expect an accuracy 96%+ (volume level). We measure our WMAPE at the item levels. This accuracy varies from 85% to 65% depending on the variability of the demand.

Q: Does the new tool enable real time conversion between unit forecast, cost forecast, and rev forecast? And secondly, does it aggregate price and cost data up the pyramid?

A: Yes our tool does handle real time the conversions. We input the data at level 1 so we can aggregate values at any level.

Q: The Demand planning team will generate the demand forecast (units) that is the base demand but from my understanding sales, marketing and finance should generate their own “forecast/plan” as well in order to allow better alignment and discussion during the S&OP meeting to achieve a final consensus number. Is that a correct statement?

A: There are many ways to organize the consensus process, some may disagree but each organization has their own strengths and unique structures. I believe it is the demand planner that tees up the disconnects with the forecast based on exception management. We ask sales to communicate structural changes and marketing to drive industry direction. From this, demand planning will create the forecast and the base consensus discussions. This is a great discussion to continue in Scottsdale.

Q: How do you resolve the difference between an aggressive business forecast(say for outside investors) and a more reasonable forecast for inventory and production to follow?

A: We create the demand planning financialized forecast that is used by the finance community. Due to this approach, we feel we have outstanding alignment which minimizes these potential conflicts.

Q: What inputs do you require from the different stakeholders?

A: Sales provides us with the voice of the customer. Sales and Marketing provide their industry insight. The demand planning team provides everyone with exception management information to identify areas of opportunity. Third party industry data is also discussed.

Q: How long did it take your organization to get the process to a point that was stable and confident?

A: As stated during the webinar, initial movement towards a demand driven organizational structure takes some time. We saw benefits from day one yet forecast accuracy continued to improve but over the first few years. The initial year one of any implementation is a monumental challenge. The benefits of changing to a new demand planning tool from a mature state takes < 6 months from implementation.

Q: What type of Forecast Accuracy improvement have you seen through the time period of gaining consensus and moving to the new Demand Planning module?

A: Our initial improvements when we moved to a demand planning solution were quite significant. Then improvement then leveled off. With the new solution we saw greater than a 5% reduction to our forecast accuracy. Based on the trend I expect to see a similar number in year 2.

Q: How would you define success?

A: We define success as forecast accuracy improvements at all levels of the forecast (demand planning, financial etc). In addition, we look at productivity savings based on the new streamlined processes as well.

Q: Are there different metrics for different departments such as Sales and Marketing?

A: Absolutely. Sales and Marketing use a short term forecast macro accuracy in dollars and demand planning still uses multi horizon WMAPE, WVolume and VA metrics.

Q: How do you get marketing engaged to own the forecast based on the inputs they give to the demand planning process?

A: Marketing’s engagement came naturally for us as the financial forecast began to be driven by the demand planning piece forecast. They quickly came to understand that the way to impact the forecast was through the consensus process, which allowed them to become very vested and involved.

Q: What is the general structure of your consensus meetings and who are the required attendees?

A: The meetings are monthly and are owned by the demand planning team. The principle demand planner chairs the meeting that includes key stakeholders from marketing, sales, finance, and customer service. My demand planning organization is aligned to our front end structure and manages by industry.

Q: How well are you dealing/managing quarter end pushes or areas where the business influences demand to meet certain financial objectives? How much of your team’s resources are spent in correcting sales history?

A: Our goal remains focused on the pure demand of our customers which is where we allocate the majority of the resources. Pull ins are managed as a walk from the base financial forecast. If we have information in advance, we will certainly work them into the forecast but these are generally the last changes to be addressed.

Q: How do you know your baseline forecast algorithm is set correctly?

A: It is about the journey. Our goal is to continue to improve the baseline statistics. The answer changes by demand type and often seems like a moving target.

Q: Sometimes, Marketing and Sales have different forecasts (driven by different constraints). How do you deal with this in your consensus meetings and which numbers do you take?

A: This is a strength of the dollarized demand planning forecast. Once sales and marketing are educated in how demand planning operate, then they begin to understand (if we don’t forecast the pieces they will not be available to sell) and the bias softens some. There are also no detailed marketing or sales forecasts. They use the demand planning financial forecast that they help via collaboration to build.

About Joe Eschenbrenner:

Joseph Eschenbrenner currently holds the position of General Manager of Demand Management for The Timken Company. He is responsible for the demand plan for $3 billion in sales and in excess of 2 million unique customer/item combinations. Joe has over thirty years of experience with Timken and in the bearings industry within Marketing and Supply Chain. Joe received both an MBA and Masters in Finance Degrees from Rensselaer Polytechnic Institute and holds a Bachelor’s degree in Mathematics and Statistics from the University of Connecticut. Joe has also served as past President of the AMRC (Automotive Market Research Council), is currently the Chair of their Economics Committee, is a member of the National Association for Business Economics (NABE), CSCMP, and is a Certified Professional Forecaster(CPF) through IBF.

Joe will be presenting an enhanced and detailed version of this webinar at the upcoming IBF supply Chain Forecasting and Planning Conference in Scottsdale, AZ on February 22nd-24th.  For registration information about the event, please visit our events page at our website for the Institute of Business Forecasting at www.ibf.org.

Alan Milliken recently presented an outstanding IBF webinar entitled Transforming Big Data into Supply Chain Analytics.

Alan’s presentation on the use of Big Data was not only informative but extremely insightful.  Using practical examples, Alan explained the significance of using descriptive analytics (e.g. reports, KPI’s, dashboards) to report performance, how the use of predictive analytics will improve processes, and the steps needed to become an “analytics practitioner” within the supply chain.

As a follow up to his IBF Webinar, Alan was kind enough to address some unanswered questions we were unable to discuss at the conclusion of the presentation.  If you would like to receive an email copy of his webinar presentation please feel free to contact us at the IBF at knowledge@ibf.org.

Q: What is the name of the software you are using to store and query data?
A: SAP Business Warehouse; Bex and Office Analysis

Q: Is it a requirement that you should get specialized software for predictive analysis?
A: Absolutely not, Microsoft Excel is fine.

Q: Regarding forecastability, the ABC/XYZ attributes, are those
attributes tied to specific SKU in the master data. How often
do you “refresh” those attributes?
A: YES; update frequency varies with dynamics in the unit. Twice per
year is most frequent.

Q: Do you recommend using the Customer Requested delivery
date or the shipment date for your Planning KPI Reporting, e.g
Forecast Accuracy.
A: Obviously, request date is best and we use this to measure  ‘On
Time Delivery’. Whether you go to the effort to adjust data to
measure forecast accuracy after the fact depends on the frequency
of occurrence and the effort required.

Q: Can analytics be of much help in industries which are highly
influenced by season and climate, particularly where demand
variation is high and the sales window period is very small?
A: Analytics are definitely applicable to businesses like our AgChem
unit. However, they tend to be more complex for seasonal
products. For example, the influence of outside climate and
probability studies are common.

Q: Can you clarify the forecast accuracy calculation scope? When
it says CM +2 lag, is that a 3­month aggregate or a single month
period?
A: Current month (CM) + 2 months lag means the forecast accuracy
for April is based on what the forecast was in January. If it takes
90 days to produce or acquire the product this is the correct lag.

Q: Do you think Data Mining, when combined with Business
intelligence will help in better Demand Predictability for Business?
A: It already does. We refer to our front ­end tool as Supply Chain
Intelligence and we use it to generate forecasting KPI’s and
generate standard exception reports. It also provides the capability
for custom queries and reports.

About Alan Milliken:

Alan is currently a Senior Manager on the Supply Chain Capability Development Team at BASF, the world’s leading chemical company. His prior roles of Manager of Business Process Education in North America and Business Process Consultant, along with his 22 years of experience in Production, Logistics, Process Control, Quality Control, Operator Training, Industrial Engineering and Scheduling….makes Alan one of the world’s foremost experts.

Alan is an IBF Certified Professional Forecaster (CPF) and has been published in countless publications and books. Alan is also the 2013 recipient of IBF’s Excellence in Business Forecasting & Planning award for his outstanding contributions to the field. AND finally, Alan holds a BS Degree in Industrial Engineering from Auburn University and an MBA in Management from Clemson University.

I recently attended the IBF Best Practices Conference and Leadership Forum in Orlando this past fall. Prior to my current role, I was a 15 year veteran practitioner and conference presenter in forecasting, S&OP, and planning. I’ve had the privilege of attending many presentations from experts all over the globe discussing S&OP, demand planning process development, metrics, etc… Without a doubt, the knowledge I’ve gained from the IBF has helped me not only advance my own body of knowledge in the field, but it has also provided me with a unique set of tools that could then be shared with colleagues and company leadership.

At the IBF in Orlando, the impressive roster of presenters was, as usual, an excellent group of planning leaders set to cover topics reflective of today’s professional. The industry representation was nothing short of incredible, especially for those attendees looking to expand their knowledge of various topics and issues across numerous industries. There were consummate professionals and experts in the field from companies such as L’Oreal, Coca-Cola, Motorola Mobility, Tastykake, Hershey’s, and Tempur Sealy International just to name a few. Collectively there were hundreds of years of experience all in one place and very willing to share their experiences and expertise.

During the Executive Leadership Forum on the first day, it became clear that this conference was going to be a bit different than those of the past. I soon noticed that there was an underlying commonality between speakers I hadn’t seen in previous conferences. It was something nearly everyone could identify with and had to address at some point in their company’s journey in forecasting as well. This continued throughout the conference and I finally realized what was linking nearly every presentation, speaker, and company together. It was big data.

Today’s companies, unlike those of 25 years ago, are faced with having massive amounts of data that most companies don’t even know how to maintain let alone analyze. It soon became very clear through the conference presentations that big data, along with predictive analytics had already started to have a pivotal impact on how demand planning utilizes data. With data collection exponentially growing every day, most presenters were optimistic about its positive impact on their company, impact to the bottom line, and most importantly how vital that data would be to demand planners. Based on the presentations I attended as well as the conversations with the group of attendees, the big data movement is here to stay and most companies want to stay ahead of the curve.

A short time ago, IBF research was beginning to see this inclusion of big data into the S&OP process. They quickly concluded that the theory of including and utilizing big data would differentiate companies by giving them the edge in their respective markets. Furthermore, feedback from the IBF conferences clearly demonstrated that this theory has already become a practical approach for some of the world’s most successful companies. Armed with this new movement towards big data inclusion, IBF responded and began recruiting experts in predictive analytics, big data collection, etc for its first one of a kind Predictive Business Analytics conference to be held in April, 2015 in Atlanta, GA.

In such a rapidly changing data landscape, countless professionals in the field will benefit from the insight of the IBF regarding big data and analytics. I for one look forward to interacting with and learning from the world’s best data analytics professionals.

Additionally, IBF’s quest to remain the premier organization for demand planners and forecasting professionals is evident by their continuous refinement of their knowledge offerings through their association with experts across the globe and demonstrated through the IBF conferences, chapter meetings, trainings and certifications, and the Journal of Business Forecasting (JBF).

For more information, please contact the IBF directly at knowledge@ibf.org

Beginning this December, the Institute of Business Forecasting is proud to publish a new blog series of case studies on Forecast Value Added (FVA). Michael Gilliland, Product Marketing Manager for SAS will be leading this series as he interviews forecasters who have applied the method of FVA analysis within their organizations, and report on their findings.  Many of the forecasters interviewed have spoken publicly about FVA at IBF conferences or elsewhere, although some will be sharing their stories for the first time here on this blog.

The inaugural FVA interview will be with Jonathon Karelse, co-founder of NorthFind Partners. Jonathon first utilized FVA analysis while implementing a demand-driven global planning process at Yokohama Tire Canada. Through his consulting work with NorthFind Partners, he now delivers an innovative use of FVA, along with other tools like the Comet Chart and Forecastability Matrix, to a broad range of clients in global manufacturing and distribution.

If you have questions about FVA, or you have experience implementing and would be interested in sharing your story, please contact Michael Gilliland directly at mike.gilliland@sas.com.

A Sneak Peak…….

___________________________________________________________________________

What is Forecast Value Added?

Forecast Value Added (FVA) is defined as,

The change in a forecasting performance metric that can be attributed to a particular step or participant in the forecasting process.

For example, suppose your forecasting software has achieved a MAPE of 40%, and after management adjustments the MAPE is reduced to 38%. We would say that the management adjustments have “added value” since they reduced forecast error by two percentage points.

The purpose of FVA analysis is to determine which forecasting process activities are failing to improve the forecast, or are making it worse. Consistent with a “lean” approach, the objective is to identify and eliminate non-value adding activities from the forecasting process, freeing resources to be utilized for more productive activities.

Forecasting can be a highly politicized process, with each participant bringing their own biases and personal agendas. It is quite common for companies to find that their elaborate forecasting processes, full of touch points for human intervention, simply make the forecast worse. We’ll see plenty of examples of such waste throughout the blog series.

How to Conduct FVA Analysis

FVA analysis begins by mapping each sequential step in the forecasting process, and then tracking the results at each step. A common process includes these steps:

Software Forecast / Analyst Override / Consensus Override / Executive Override

Although some systems only keep the latest adjusted forecast, a thorough FVA analysis requires that data be kept for each step in the forecasting process. You might find that the first two steps achieved MAPE of 40% and 38% respectively, but the Consensus Override was 39%, and the Executive Override 42%. Such results suggest that the final two steps are just making the forecast worse. But by only keeping the latest adjusted forecasting (without tracking the results at each process step), you would never know.

The Naive Forecast

FVA analysis also requires comparison of process performance to a “naive” forecast. Per the IBF Glossary, a naive forecast is something simple to compute, requiring the minimum of resources. Traditional examples are the random walk (aka “no change” model, where your last observed value becomes your forecast), and the seasonal random walk (e.g., use the actual from the same period a year ago as the forecast for this year).

Utilizing a naive forecast requires virtually no effort or cost, so a reasonable expectation is that your forecasting process (which probably does require considerable effort at significant cost) should result in better forecasts. But until you conduct FVA analysis, you don’t know this.

A very disturbing reality is that many organizations forecast worse than if they just used a naive model. A recent study of eight supply chain companies by Steve Morlidge of CatchBull (“FVA and the Limits of Forecastability” presented at the IBF-Amsterdam 2013) found that 52% of their forecasts were worse than using a random walk. So for all the time and money spent on forecasting, over half the time these companies forecasted worse than if they had done nothing and just used the naive model.

For more information you can download the whitepaper “Forecast Value Added Analysis: Step-by-Step”.

Not a member of the Institute of Business Forecasting?  You’re missing out on networking, member discounts and the included subscription to the Journal of Business Forecasting (JBF) and so much more. Click HERE to learn more.

The Institute of Business Forecasting & Planning, IBF, would like to proudly acknowledge and congratulate our 2014 Business Forecasting & Planning Recognition Award Recipients.  The IBF’s Business Forecasting & Planning Recognition Awards are presented annually in October to those individuals who distinguish themselves as the most influential and innovative thought leaders, solution providers, and leaders in the field. The following individuals were honored at the IBF’s Business Planning and Forecasting Conference in Orlando on October 28, 2014.

LIFETIME ACHIEVEMENT IN BUSINESS FORECASTING & PLANNING

Mark Covas (Center)
Group Director, Planning COE at the Coca Cola Company
has been honored as the IBF’s 2014 “Lifetime Achievement in Business Forecasting & Planning” recipient for his excellence, professional commitment, and dedication to advancing the field.

Anish Jain, Managing Director, IBF (right) on honoring Mark Covas:
For over 20 years, Mark Covas has more than demonstrated his passion for the field and what the IBF was doing to support it. Early in his career, Mark became and continues to be, a torch bearer for those in demand planning and forecasting. Mark’s passion has led him to be a key contributor since the IBF’s inception. He has been published repeatedly in the IBF’s Journal of Business Forecasting. He partnered with Dr. Chaman Jain, IBF’s founder, to publish a Wall Street Journal special article entitled ‘Seven Tips for Making Forecasting More Effective’. He owns the longest tenure as an IBF board of advisor, and has been a frequent speaker at IBF conferences sharing his passion, knowledge, and expertise. His international influence has opened doors in London and Singapore and his groundbreaking work with U.S companies has impacted multiple geographic regions, thousands in the field, and numerous countries such as China and Taiwan. Mark’s commitment and passion has been an incredible influence on not only the IBF and myself, but the entire global forecasting community.

Mark Covas on receiving this honor:
“I feel very honored to receive this award but have to admit that I am just an example of a Practitioner who ‘knows what they don’t know’. Over the past 18 years I leveraged every aspect of the IBF to fill those knowledge gaps, which in turn has enabled the success I have had in my career. That success can be directly attributed to the IBF and their network, many I have come to know over the years who have generously shared the best practices they have applied at their own companies. Additionally, it is the great partnerships I have been able to form with industry leading vendors who have provided the needed tools to support processes I have been able to put into place. The recognition is greatly appreciated, but must be shared with a very wide and diverse group of talented individuals”

EXCELLENCE IN BUSINESS FORECASTING & PLANNING

John A. Gallucci (Center)
Senior Director, Product Planning, Frozen Division at Pinnacle Foods Group LLC
has been honored as the IBF’s 2014 “Excellence in Business Forecasting & Planning” Award

Alan Milliken, SC Education Specialist at BASF & 2013 Excellence in Business Forecasting & Planning Award Winner (right) on honoring John Gallucci:
“For over a decade now, John has offered his expertise and thought leadership to the Institute of Business Forecasting (IBF). He has introduced new ideas to the community such as applying lean techniques to the forecasting process to improve the effectiveness and efficiency. John has written numerous articles in the IBF’s Journal of Business Forecasting to help others implement and improve planning processes…John’s efforts as a practitioner have included ground up implementations of demand planning and S&OP processes. He possesses the ability to assess the current environment and designs planning processes that achieve desired results. John also continuously improves planning processes at his firm by introducing leading edge technology and the latest best practices. ”

John Gallucci on receiving this honor:
“It is an honor to receive this award, knowing that I was nominated and selected by peers who handle similar challenges and opportunities on a daily basis. I want to thank the IBF, specifically Dr. Jain and Anish, for the impact that they have had on my life and my career. I am also grateful for the opportunities that I have had at great companies like Fujifilm, Gerber, Nestle, and Nice-Pak to create better planning environments, and to help drive energy into their cultures. I am truly passionate about Demand Planning and S&OP, and to be considered for this award is an amazing gesture….The “IBF 2014 Excellence in Planning and Forecasting Award” is voted on by other practitioners who are driving this revolution, and it is an honor for my body of work to be considered.”

View Previous Recipients

Read more about the IBF Awards

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