I think there is a misconception when it comes to Demand Planning and Forecasting. I’ve done it for years and I realized the error in my thinking. I was caught up in the illusion that if I worked hard on my forecasts, if I set the right parameters, if I weeded out inconsistencies, my forecast will become better. I was soooo wrong. The problem is in people, people do not act the way you want unless you tell them how to act (and even then they don’t).
|My best and most used quote when teaching others how to forecast is
“The best way to predict your future is to create it!”
– Abraham Lincoln.
It says it all. And it is not about securing 1000 products, It’s about the 10 you hang your strategy and your profitability on, these are the ones that are the future you are trying to create.
I remember sitting in discussions with sales leaders about these 10 heroes and how they would get more room in the catalogue, how the price investments will be tuned to support them with lower prices, and so on. Our forecast was sound, and based on good statistics, a proven algorithm and solid qualitative input. Then the catalogue was released and…nothing happened, no dramatic increase. Why? The guys and gals on the shop floor had no clue that there was a focus on these articles. They had been given highest priority by the supply chain to sell out some other 10 articles because there was an over capacity in production due to that those articles where over forecasted last year (or we would lose money). My forecast was now crappy on 20 of my biggest articles (10 under performing and 10 over performing) and eyes were on me for making a poor forecast. What do you think happened a year later?
If the sales organization had been clear on its priorities we could have made money in both last year and current year sales. If the WHOLE organization had been acting on the same prioritizations, we would have met the forecast. It’s all about communication.
So when talking about forecasts and how to increase forecast quality, remember that outside your structured systems there are people…
Forecasts give companies the probable outcome of the future, sales plans secure that the outcome is the way you wished!