Comments on: Forecasting in a Challenging Business Environment: Lessons From Procter & Gamble

By: Ishan Gunatilleke

Ishan Gunatilleke — Wed, 16 Sep 2009 02:38:53 +0000

Great points. I’m particularly curious to get more insights on best practices and watch outs related to store level order forecasts that Don Madsen is refering to. I have seen a couple of attempts at different FMCG organization never getting closer than 50% at the store/sku/day level. Any thoughts on tools, statistical techniques, business processes or input used to get to an executable store/sku/day level order forecast to drive replenishment. There is a lot of discussion around POS data, but what role if any does in-store inventory levels play.
Don can you share some learnings from the exercise is Korea.

By: Dan Rasoi

Dan Rasoi — Tue, 15 Sep 2009 22:21:08 +0000

Nice article, you make some excellent points!

Some starting points:
Tracking the performance of the “management overides” against the baseline or system forecast?

After the results are analyzed would both parties (management and Forecasting Team) evaluate the outcome and decide which approach is best for the company.

Decisions should be based on data, sometimes a little compromise is neccesary, however you need to follow the model:

Plan
Execute
Measure
Adjust

At the end of the day it should not me a finger-pointing exercise but a learning experience that will make for better processes.

By: Don Madsen

Don Madsen — Tue, 15 Sep 2009 17:18:05 +0000

Excellent “strategic” insight into the real issues for demand planning. However, What happened to all the ECR initiatives, I worked with Ralph Drayer and others while I was Principle, Integrated Logistics with IBM Consulting Group in early 90’s.??

IBM had “purchased” the “Continuous Replenishment” software, including the “agreed to rules of opeations” that allowed actual POS data by sku, by store, to be uploaded everynight and determine total demand and forecast, build and ship deliveries, automatically – I.e., Proctor & Gamble placed orders on themselves for replenishing the likes of “Walmart per se”.

PCA / Sara Lee / Dominick’s at the time – where also instrumental in leading edge “pull demand planning” vs “push”.

Lastly, I know it worked well – because in 1996 – I did a major Supply Chain (ECR Readiness Assessment) consulting project for LG Chemicals in Korea and their largest customer! WalMart had already moved into Korea and P&G was coming. The LG chemical division, included the major competitive products that P&G sold. OH – by the way – did I tell you in Korea all inventory at Retail store is “vendor managed inventory” on consigment, with no cost borne nor paid by the retailer until (some time after) it is sold. That may throw a wrinkle into some of your standard modelling assumptions — Which gets back to the point of the macro-economic factors that effect all of this – and of course LG has 48 DC network with their own truck deliveries (kinda like the Coca Cola network distribution model, with DSD (Direct Store Delivery) and direct sales force.

By: Dan Rasoi

Dan Rasoi — Tue, 15 Sep 2009 00:27:27 +0000

Nice article, you make some excellent points!

Some starting points:
Tracking the performance of the “management overides” against the baseline or system forecast?

After the results are analyzed would

By: admin

admin — Mon, 14 Sep 2009 22:20:46 +0000

Developing accurate forecasts is even more difficult in a high growth market, where one just does not know the true potential; with repeated unidirectional forecast biases. Forecasting will always remain a challenge particlualry in the FMCG industry with large number of skus and variables. Having said that, I think forecasts are impacted more by internal factors than external eg trade & consumer promotions, lack of internal communications with lead-lag in information flow etc.

By Tanmay A

By: admin

admin — Mon, 14 Sep 2009 22:17:44 +0000

There are 2 dimensions to the forecast –
1. The aggregate volume
2. The mix within the categories

Each is equally important, but the mix forecast is far more important to product availability and demand response. We have learned that even if the aggregate volume is off, if the mix forecast is correct, the turns and product availability are significantly better.

By Jeff Fisher

By: admin

admin — Sat, 12 Sep 2009 22:01:15 +0000

Forecasting accuracy is definitely a very important subject but can be applied practically to limited extent because sometimes overall business strategy takes over as the deciding factor

By Manoj Sharma