Volume 32 Issue 2
Summer 2013

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FEATURED ARTICLES:

“Lean Forecasting: A Competitive Edge”
By John Gallucci

In these highly competitive markets, it is more important than ever to improve efficiency and shrink waste to survive and grow. One important area where waste can be reduced is forecasting, a practice the author calls “Lean Forecasting.” This article describes in detail the wastes that exist in the consensus demand planning process, and suggests tools and ways to get rid of them.

“Leveraging Exceptions and KPIs to Improve the Demand Forecast”
By Alan L. Milliken

Because of rapidly changing market dynamics, exceptions are now part of doing business. To survive and grow in this market, it is important to leverage exceptions; this article outlines a strategy to leverage them. To do that, the author suggests first preparing exception reports by ABC classification, at an account level, by items and category, based on statistical forecasts as well as ones that include overrides by Marketing and Sales, and then taking corrective actions. He discusses in detail which action will be appropriate under what circumstances.

“Is ‘Big Data’ Just More Data?”
By Larry Lapide

This column deals with “Big Data,” one of the latest technology trends being hyped. It discusses what managers need to consider when evaluating whether or not to implement it at their companies. A brief synopsis of a new book introducing the concept of signals versus noise is given, as well as some of the lessons learned from efforts in downstream data—a long-standing “Big Data” industry initiative. The column recommends identifying a few key predictable signals from Big Data to focus on during implementation, and considering the rest of the data to be noise that adds no useful information towards improving decision making.

‘Sales & Operations Planning: Where Is It Going?”
By Tom Wallace

In this highly competitive environment, it is more important than ever to manage businesses efficiently and effectively. S&OP is the process that does just that. The author explains in detail why such a process is needed, and what the future holds. The author also clears up a number of misconceptions about the process including S&OP in real time, when to use Global S&OP, and the role of weekly S&OP. In addition, he covers the powerful impact that S&OP can have when used to support strategy.

“Using Big Data to Enhance Demand-Driven Forecasting and Planning”
By Charles W. Chase, Jr.

Big data is a popular term used to describe the exponential growth, availability, and use of information, both structured and unstructured. Much has been written on the big data trend and how it can serve as the basis for innovation, differentiation, and growth. Companies using real information to sense demand signals and respond quickly to changes in demand can confidently cut inventory, reduce working capital requirements, and free up cash.

“The U.S. Economy…A Glimmer of Hope”
By Jack Malehorn 

“Weak Global Recovery with Changing Uneven Growth Patterns”
By Evangelos Otto Simos

“Answers to Your Forecasting Questions”
By Chaman L. Jain

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The Journal of Business Forecasting (JBF) has been providing demand planning, forecasting, supply chain, and S&OP practitioners with jargon-free articles on how to improve the value of their roles and company performance from improved forecasting and planning for over 30 years. A subscription to the JBF comes with IBF membership at no additional cost.

John Gallucci - Nice-Pak, Inc.

“So, even a well thought-out forecasting process can be wasteful if it is not done properly.” This was a remark made by one of the attendees who came to hear my “Lean Forecasting & Planning” presentation at IBF’s recent Business Forecasting & Planning Academy @ 2 Levels.  This declaration was also one of the more noteworthy “a-ha!” moments of the workshop.  I designed the session so that it focused on the application of lean principles in the forecasting process.  We defined any activity that did not create value for the consumer as wasteful, and then targeted those activities for elimination.  Attendees also received some tools to assess where waste exists in their companies, and were able to provide an unending list of examples in their current processes such as…

… the duplicate activities that take place because of a  lack of trust and poor communication across functions built on a silo mentality

… the painful manual processes that could be automated if capital funds ever become available

… the forecaster who spends most of her time on “C” and “D” items

… the egomaniac running Sales who pushes the Consensus Team to change their projection so he can meet his own objectives

….Etc. etc.

This IBF workshop also reviewed the opportunity cost of waste in Forecasting. Opportunity cost reduces an organization’s clock speed, reduces margins, and drives a less productive culture.  It also focuses key resources on meaningless internal positioning tactics, while the competition is working towards creating the next big idea!  One attendee at the workshop provided an example where her cross-functional team spent over 100 hours per month building a forecast that was never applied to their advanced planning system.  What a waste!

The application of lean principles is relatively new to Forecasting, even though it is something we have been doing  for years without recognizing it.  The elimination of bias, for example, is driven by a zero-waste lean mentality.  Pull-based market-driven S&OP is also emerging as a trend for leading Planning organizations.  These activities show clear progress, but they only address part of the opportunity.

We must take a more holistic view when targeting the elimination of waste in the Forecasting process.  It exists in our processes, policies, and systems.  It is an unwieldy enemy that transcends functions and requires change management practices.  Eliminating waste from Forecasting  requires continuous improvement techniques that by definition never reach an end-state.  The task is difficult, but then again, the most fulfilling ones often are.

A brief role-playing scenario in the IBF workshop provided clear proof that lean forecasting is a competitive advantage.  My journey has begun.  Has yours?  Where does waste exist in your forecasting organization?  Are you up for the challenge?

John Gallucci
Sr. Director of Supply Chain
Nice-Pak, Inc.

Hear John Speak at