Dick Clark

Developing accurate forecasts is never easy.  The current economic environment makes it even more challenging and many businesses have a bias to over forecast.   At the same time, businesses need the most accurate volume forecast possible to enable effective planning and decision making.  It is important to understand that this is a business issue, not a forecasting capability issue.  Demand Planning does not have a crystal ball.  There is no silver bullet.  There is not one work process, one training class, one software solution, or one method of collecting assumptions that will eliminate forecast bias.  We must approach the problem holistically and recognize that many basic elements must come together.  While we must be aware of the current volatility and uncertainty of demand, the areas of focus are unchanged:

1. Within Demand Planning, we must stick to the basics.  Basic models, standard analysis techniques, and “normal” forecasting processes really work.  The same things that improve forecast accuracy and reduce error in good times work now as well.
2. Within a business, we must recognize that macro events and processes are the largest source of forecast bias in most businesses.  Bias is not coming from our software solutions.  Rather, it is macro assumptions, management over-rides, and other “big” decisions that lead to forecast bias.  Addressing culture, behavior, and rewards are critical to eliminating bias.
3. Within a market, we must better understand macro market trends.  In the current economic environment we are seeing unexpected changes in market size and dramatic changes in customer, shopper, and consumer behavior.  We need to better understand the relationship between market size, shipments, and share through collaboration with business partners.

Many businesses are dealing with persistent bias.  It is an on-going problem that not only impacts business results, but also erodes Demand Planning credibility with the customers of the forecast.  Eliminating forecast bias is difficult and no single approach works for all businesses.  I will be covering some of these ideas in my Luncheon Keynote presentation and Executive Forum at the IBF Conference in Orlando.  I hope they will spark your thinking and lead to dialog with others at the conference and with your business partners when you return home.  I look forward to having the chance to talk with and learn from many forecasting professionals during the conference.

Dick Clark
Demand Planning Global Process Leader
Procter & Gamble

See DICK CLARK Speak at The IBF’S:

$695 (USD) for 3 Full Days!

October 12-14, 2009
Orlando Florida USA

Mark Covas

Dr. Jain (Chief Editor of the IBF’s Journal of Business Forecasting), and I have recently been collaborating on an article that is a wake up call for Planning organizations to have their house in order so they can recognize the signals for an economic recovery. I am a proponent for completeness and integrity of the forecast across the full planning horizon. In fact, right now I would bet most Planners are only focused on the next 3 months. Of course, not all industries are alike.  So forecast horizons and forecast buckets differ (weekly vs. monthly), but in most cases, the further out in time you go the less attention the organization gives to the quality of the forecast. You can often see year over year comparisons where volumes may actually show a decline only because the Planners have not included future promotions or new product launch activity. How can we give Senior Management confidence in the sufficiency of our volume forecast to meet our growth goals if we are not giving the same focus of attention to the 18, 24, or 36 month out forecast that we give the 3, 6, and 9 month out forecast? The discussion I would like to generate is how ‘Yes We Can’ align our volume forecast with our financial forecast in such a way that we can work with a single number forecast for at least an 18-24 month time horizon. Plus, how the S&OP process can close those gaps and provide better forward visibility.

As Anish Jain (Managing Director of the IBF) has planned these presentation paths at the IBF’s Orlando Conference, you can see that one discussion easily builds on another so we end up with a chain of conversations over the course of 3 days.  This helps to fully vet the possible options for us take different best practices back into our work environments.  As a member of the IBF for over 10 years and a huge fan of the Journal of Business Forecasting, I have to say that attending the Best Practices conference in Orlando is always my favorite event. To be able to speak this year is a great honor, but the highlight for me is meeting and sharing best practices with Planning experts from around the world and from every industry imaginable.

Your comments based on what works and does not work in your process to build forecast quality and integrity are welcome.  Hopefully, we can have a meaningful dialogue where we all benefit.

Mark Covas
Innovation Diamond Management
Procter & Gamble

See MARK COVAS SPEAK at The IBF’S:

$695 (USD) for 3 Full Days!

October 12-14, 2009
Orlando Florida USA