Forecasting Best Practices
explanatory Essay
2042 words
Forecasting “Best Practices”
“Effective demand planning and sales forecasting across the supply chain can bring a host of benefits. Specifically, it can help improve labor productivity, reduce head count, cut inventories, and speed up production flows, and increase revenues and profits.
-Edward J. Marien
To find the “best practices” for forecasting, our team researched many cases of forecasting success, and found five companies with a common theme. Rayovac, the Coca-Cola Bottling Company, AAi. FosterGrant, the Sara Lee Corporation, and the Scotts Company all had major problems with forecasting, some of them very similar. To address and solve these problems each of these companies made major improvements to their forecasting systems. Although some used similar methods and others very different, these companies found that the right people, process and information technology was the key to efficient and accurate forecasting.
Rayovac
Rayovac discovered the proper use of forecasting when it implemented its consensus decision-making teams to improve their performance. They believe that the best information comes directly from the customer. Therefore, their forecasting takes place from the bottom-up. Sales, marketing, finance, and supply chain builds a consensus for forecasting, inventory management, scheduling, warehousing, and transportation. Their consensus forecasting is the responsibility of a cross-functional team.
For their annual planning process, a bottom-up and a top-down forecasting procedure is used. The top Key Results Measures (KRMs) are compared with the bottom-up forecast which is developed by the consensus teams. Meetings are held to align the two when there are discrepancies. Monthly meetings are held to update the bottom-up forecast and actions are taken to bring the forecast and annual plan into alignment.
Rayovac has discovered some key guidelines to be used for successful forecasting and planning:
1. Actually using the forecast to drive the business and not...
... middle of paper ...
...orecasting cannot be understated. Many companies have found that after successful forecasting and proper use of people, process, and technology have led to increased performance of the company as a whole. This has been proven in our analysis of the current best practices of forecasting in the workplace.
References
1. Bowman, Robert J. “Scotts Cultivates a Customer Centric Supply Chain Strategy.” Global Logistics and Supply Chain Strategies, July 2004.
2. Hoffman, Kurt C. “Who’s That Behind FosterGrant’s Demand.” Global Logistics and Supply Chain Strategies, December 2003.
3. Marien, Edward J. Demand Planning and Sales Forecasting: A Supply Chain Essential. Supply Chain Management Review, 1999
4. Murphy, Jean V. “More Accurate Forecasts Give Sales, Operations Planning New Life at Sara Lee Unit.” Global Logistics and Supply Chain Strategies, March 2003.
5. Murphy, Jean V. “Special Issue: Collaborative Commerce Forecasting Tool Lowers Coke Bottler’s Inventory.” Global Logistics and Supply Chain Strategies, November 2002.
In this essay, the author
- Explains that effective demand planning and sales forecasting across the supply chain can help improve labor productivity, reduce headcount, cut inventories, and speed up production flows.
- Explains that rayovac, coca-cola bottling company, aai, fostergrant, sara lee corporation, and scotts company all had major problems with forecasting.
- Explains that rayovac's consensus decision-making teams use forecasting to improve their performance. they believe that the best information comes directly from the customer.
- Explains that forecasting, supply chain, and communication software must be utilized and a monthly process with specific steps to be followed each week.
- Explains that rayovac has seen improvements in communication among all functional areas, a combination of technology with human intuition and expertise.
- Explains that coca-cola bottling co. consolidated has developed a forecasting system to change their previously decentralized forecast and production processes.
- Explains how sara lee has improved its forecasting system with professional demand planners and updated software tools.
- Explains that scotts company was dominating the lawn and garden industry in 1999, but had problems in its supply chain due to inaccurate and unreliable forecasts.
- Describes how aai.fostergrant's seasonal demand was similar to that of scotts.
- Explains that scotts cultivates a customer centric supply chain strategy.
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