It’s no wonder that supply chain planning environments are often challenging and chaotic, with demands coming at us from all directions. While customers and suppliers are often the cause of our anxiety, some of the most threatening fire often comes from our own executive management. Dealing with internal leaders requires courage – indeed, the success of your organization depends on it.

Regardless of whether it’s a deliberate tactic or a reflexive response, when the c-suite instills and maintains a corporate culture that stifles open and honest communication, that leadership can sometimes be our greatest enemy. Over the years, I’ve witnessed situations in which truth and transparency are desperately lacking.  However, fearing the wrath of executive management can make an organization’s stakeholders very reluctant to  reveal bad news. To avoid a dressing-down in front of the troops, bad news is often sugar-coated, or even worse, not communicated at all. One hopes that bad news isn’t a day-to-day event, but when bad news is looming, it should be addressed head-on and in a timely manner.

The Reality Of Demand Forecasting

When it comes to forecasting demand, many factors can contribute to a rosy outlook. We develop and launch new products with the hope that they’ll do well – all the years of researching and developing products inclines us to be optimistic whether it’s warranted or not. Or Marketing is bullish about a new promotion because their budget depends on these projected revenues. But these are anticipated volumes and forecasts do have a remarkable propensity for being less than right, and you are the one who has to separate reality from fiction.

Have the courage to declare that the plan did not materialize – your business will benefit from the truth in the end

What should your organization do when projected volumes aren’t coming to fruition? The sooner you can notify the rest of the organization, the better your chances are of achieving a positive outcome or even mitigating risk.  Yes, there will be a net lower revenue, but additional resources won’t be wasted on building products to a finished goods level, only to sit in inventory. Have the courage to declare that the plan did not materialize – your business will benefit from the truth in the end – and then create and enable alternate strategies to overcome these areas of constrained demand.

New Product Introduction Gate Process

New product introductions can be several years in the making, and the life cycle of that product can be as short as one year. Depending on how much time and money has been invested in the new product, if the product launch fails, it could have an enormous impact on revenue and market share. Product engineering teams generally have a strict set of gates that a product must pass through as it moves its way closer to release.

Rather than ducking for cover, honesty now saves valuable time and money

These pre-defined checks and balances are in place to ensure that the product is ready to advance to the next step. When there are great expectations on launching a new product, no one wants to declare failure on the passage of a gate, particularly if there are many more gates ahead that will course-correct. So, what does a fearful organization do? Rather than face management, it gives the product a pass and lets it move forward. This only moves the problem up the line to the point that it can jeopardize the launch itself. Rather than ducking for cover, honesty now saves valuable time and money.

Truth In Available Line Capacity

Manufacturing lines have finite levels of capacity. We have yet to see a plant state capacity at its full theoretical level, and that makes perfect sense. But when you state capacity at a lower level – sometimes referred to as “sandbagging” – the reduced level of capacity is used by the plant for many reasons, such as variability on the line, or distrust of demand, or another creative explanation. The result is a self-inflicted, artificially constrained plan. We get it. Things happen outside of our control. However, it’s imperative to be honest with your capability up front, because it can only help the overall success of the plan, and it will actually reduce the time for error resolution.

The Supply Is On The Way…..Or Is It?

Suppliers can come in all forms and from all corners of the globe. They provide us with everything from piece parts to semi-finished to fully finished goods. Our ability to deliver a finished product to our customers is highly dependent upon the timely and reliable delivery from our suppliers. We place purchase orders on our suppliers, receive a delivery date, and expect an on-time delivery.

Honest and early communication helps to mitigate the negative impact of late supplier deliveries

But when all deliveries are not timely, what do we say when executives are breathing fire down our necks? When there’s a short window between how much advance notice you have before you need to report to management, what do you communicate before the “shoot the messenger” game starts? The answer is, don’t play the game at all. Honest and early communication helps to mitigate the negative impact of late supplier deliveries.

How Big Is Your Inventory Buffer?

Everybody says inventory is a necessary evil; necessary because we need inventory for order fulfillment, and evil because too much of it ties up cash. Typical marching orders from management include a mandate to reduce inventory levels. But as time passes and inventories rise, or inventory levels dip below minimums, what do you communicate to management? Management won’t like either scenario, but too much is probably the least favorable answer. Why? Because once product is in inventory, you can’t change it immediately. This is a case of bad news vs. worse news—while neither scenario is ideal, communicating accurate levels to the rest of the organization allows for the proper actions to be taken, albeit after the fact.  Inventory might be bad, but it is still that necessary evil which should be measured at actual levels and communicated to management.

Honesty Is Always The Best Policy

The old expression, “Don’t bring me bad news; bring me solutions,” is generally good advice. But what happens when there are no immediate solutions to address bad news? Bad news is bad for a reason – ducking for cover to avoid drawing fire only makes it worse. Honesty and transparency are always the best policy, and open and honest communication are the only ways to address, mitigate, or completely remove the negative impact of bad news. Changing an oppressive business culture into a proactive entity that fosters honest, transparent behavior, starting at the top, will serve any organization well.

Bill Mrzlak is CEO of ChainSequence.com.

I am pleased to announce the completion of my new book, “Fundamentals of Demand Planning & Forecasting.” To me, this is the most comprehensive book written in the area of demand planning and forecasting, covering practically every topic which a demand planner needs to know.

This book discusses not only the different models of forecasting in simple and layman terms, but also how to use forecasts effectively in business planning. The material covers forecasting processes from Silo to Consensus Forecasting to Sales & Operation Planning(S&OP) to Collaborative Planning, Forecasting and Replenishment (CPFR) to Integrated Business Planning (IBP). The book then moves on to describe how each one of these processes improves over the other. It gives many real life cases and examples to make its  point.  No matter how accurate forecasts are they have no value unless they are used. For that, the book explains how to report, present and sell forecasts to management.

Also, since nothing improves unless it is measured, the book discusses in detail key performance indicators, which are used or should be used in business.  This is also supported by examples of what we can do to improve forecasts. Above all, it brings out a number of worst practices adopting the premise that once companies recognize what they are doing wrong, they will do something about it.  In this book you will also find the criteria for selecting a forecasting & planning package or system and more.

The Book shares benchmarking research data collected by the Institute of Business Forecasting & Planning (IBF). Readers will find this information useful in terms of deciding where the forecasting function resides at companies, forecast error across multiple industries, product levels, and horizons, and so much more.

“Fundamentals of Demand Planning & Forecasting” is especially geared towards those who have just entered the field of demand planning, forecasting, and S&OP or want to know more about it.  It is written in a simple language so that a person with little or no knowledge about the field and/or statistics can follow it. Although, the book is appropriate for beginners, persons already in the field will find significant value as well.

Finally, the new book will support IBF Certification, as it will be included in the study materials that a candidate will receive when they register to take the IBF’s Certified Professional Forecaster (CPF) and Advanced Certified Professional Forecaster (ACPF) exams.  IBF’s certifications are known across the world to increase the probability of S&OP success and increase the value of any team whose members hold them.

You can view the Table of Contents for the book here.

This book is the result of decades of experience in demand planning and forecasting as a researcher, practitioner, and academician. I’ve dedicated most of my professional career to business forecasting & planning and am pleased to offer you this book. I hope you enjoy this masterpiece.  Feel free to share your comments and questions, as I would enjoy hearing from you.

Dr. Chaman L. Jain
Chief Editor, IBF’s Journal of Business Forecasting
Professor, St. Johns University (New York USA)

Book Testimonials:

“This is much more than another dry book about forecasting. Yes, the math is there, but it is much more than that, with over 40 years of experience and real life examples where the function is at the moment, how we got here and most importantly where we are going. Whether you are just getting into the vocation or an executive looking to take your Demand Planning to the next level, make sure to pick up this book to ensure your organization is heading in the right direction.”
—Michael Wachtel, Vice President of Demand Planning, L’OREAL

“The authors have captured the key issues of managing a world-class Demand Planning process. The book strips down a complex subject to its essential elements and explains them clearly and concisely. They use practical, real world examples to illustrate the concepts presented. It is a must for managers responsible for improving their organization’s Demand Planning capability or someone new to Forecasting who needs to understand the basics of proper data selection, forecasting models, or improvement metrics.”
—George Hesser, Demand Management Process Manager, E.I. DUPONT DE NEMOURS

“The authors thoroughly detail current best practices in Forecasting, Demand Planning, and Sales and Operations Planning (S&OP) across all types of industries. It is an excellent educational resource for both the novice forecaster and the experienced planning professional.”
—Richard Herrin, Director of Supply Chain, GEORGIA GULF CORPORATION

“The book is an important contribution to Forecasting and Planning literature, written by authors who have had their pulse on Business Forecasting and Planning for decades. They’ve done an excellent job in blending the body of knowledge from various sources, along with their own practical business and teaching experiences, to produce a very readable book that bridges theory with what is really going in Business Forecasting and Planning. My kudos goes to them!”
—Larry Lapide, Research Affiliate, MIT CENTER FOR TRANSPORTATION & LOGISTICS

“This is a ‘How to Book’ every Forecaster and Planner should have on their desk! The book has provided the Forecasting and Planning community a well balanced view of the science and art of creating a forecast in a very conversational tone. Using real world examples, the authors explain ‘What needs to be done, Why to do it, and How to do it.’ I appreciate the authors for taking the time and effort to put down on paper a summary of their 40+ years of insight, which includes the experience from leaders the IBF has brought together over the years. This is a beautiful work of substance, built on real world experience, and skillfully articulated that anyone in the Planning organization could benefit. Well done!”
—Mark Covas, Senior Director Demand Planning–NACP, GEORGIA PACIFIC

“It is surprising how some senior leaders lack the needed understanding of Demand Planning & Forecasting. They often oversimplify, are mystified, or sometimes just plain wrong in how they think about Demand Planning. This book is an excellent Demand Planning guide, from the process to techniques to metrics to data to systems; it is not just for the novice, but also for practicing professionals. Leaders will find it perfect to educate their teams, peers, and management on critical business processes that keep the supply chain in motion. This book will be a must read for members of my team.”
—Todd Gallant, Senior Director, Timberland Operations, VF CORPORATION

“I found the book to be highly comprehensive and readable, an accomplishment in the often technical subject of forecasting. I would recommend the book to any Demand Planning practitioner as a practical way of maintaining current knowledge in this rapidly changing field.”
—Jay Nearnberg, Director, Global Demand & S&OP Excellence, NOVARTIS CONSUMER HEALTH

“This work is a great foundational book for anyone working in the Forecasting and Demand arena. It provides loads of information in a thorough yet concise manner. Definitely a must have for your library.”
—Curtis Brewer, Head of Forecasting–Environmental Science USA, BAYER CROPSCIENCE

“The book provides a comprehensive review of the Fundamentals of Business Forecasting. It goes well beyond the typical analytical modeling that most forecasting books emphasize. It highlights the relevant and timely business implications of Forecasting and its importance in strategic business processes. Anyone wishing to improve their Business Forecasting results should read.”
—Deborah F. Goldstein, Vice President, Industrial Demand Planning & Customer Fulfillment, MCCORMICK USIG

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Jim Workman

Natalie Scheidler

How many times have you heard your Forecast Accuracy is too low and it must improve?  Then you think, “It is a forecast!!  If I could predict it to 100%, I’d have gone to Vegas and be retired now.”

Well, we may not be able to help out your early-retirement plan that comes from a “perfect forecast,” but we will try to help make sure you are measuring the right behavioral results to drive improvement at your company. Our combined experiences have provided us with some insight into forecasting metrics and reporting that we will share with you in October at the IBF Conference.

Every company has “their” metrics and “their” reports, and everyone uses this information differently.  While we all want to think that “our” way is the best way, Natalie and I believe that there’s not one perfect set of measures (despite our presentation title).  The key is how you adapt metrics to fit with your company’s culture, and how you use the data to drive improvement or support decisions.  We have many real life examples of how we create our “perfect” set of metrics to measure our supply chain performance and how we drive improvement and decisions with this information.  In Orlando at IBF, we will challenge you with our presentation to evaluate your “perfect” set of metrics and to find opportunities for improvement within your own company.

We look forward to being able to share some of our company’s “Perfect” Set of Forecasting Metrics, as well as learning about your “perfect” set of metrics at the upcoming IBF’s Best Practices event in Orlando.

See
Jim & Natalie Speak in Orlando at IBF’s: