DOW up, DOW down; oil prices spike, oil prices spiral down; jobless claims up, jobless claims steady!! The news is full of contradictions. Is it the start of recovery after what was termed the greatest economic crisis since the Great Depression or are we still in the midst of a perfect storm? We think that debate is better suited to qualified economists than to a couple of practitioners like us.
What we know for sure is that this is a different world – past trends are no longer indicative of future. Still, it is surprising to see how many companies continue to adhere to demand planning practices of past. In a recent survey on current state of demand forecasting practices, conducted by SAS and Purdue University, it was found that Excel Spreadsheets are still the most frequently used demand management tool with about 85% of respondents reporting use of the same for demand forecasting and planning. Interestingly, in the same survey, about 54% of respondents reported using jury of executive opinion as a frequently or occasionally used technique in demand forecasting process.
No wonder in past two years, we saw a large number of companies, across multiple disciplines, write off huge inventories, run continuous promotions at rock-bottom prices, and in general do anything to survive. But that is not the complete picture! We also saw a handful of companies that stood firm in face of market volatility and even emerged stronger. What is it that made these companies deal with market pressures better? How were their demand forecasting and planning practices different from others to make them more resilient?
The SAS-Purdue survey included more than 180 forecasting managers, planners and supply chain executives from 170+ unique companies. The findings revealed interesting differences between demand forecasting leaders and laggards– differences in terms of key performance metrics such as fill rates, customer satisfaction levels and forecast accuracy, as well as in terms of organizational and process level maturity.
Best-in-class organizations consistently shared many characteristics, including:
- Higher degree of organizational alignment between various functional groups.
- Strong focus on measuring and managing to relevant performance metrics
- Reliance on advanced forecasting technology to support sophisticated functional capabilities including causal techniques, attribute based modeling, and simulation.
If you are one of those leading organizations, we would like to hear your experiences. How important do you think is a pro-active, process view of demand forecasting for an organization to become best-in-class? If you are somewhere along the curve – working your way up to the demand planning maturity ladder – don’t despair, you are in good company.
At the upcoming IBF Best Practices conference, we will share the specific characteristics of best-in-class companies as well as real life case studies on how you can transform your demand management processes.
Send us your comments on anything specific you would like to hear about from us. Remember, learning from each others’ experiences can only help accelerate our way to maturity!
Tom Vogel, Director of Supply Chain Integration
Dreyer’s Grand Ice Cream
Ritu Jain, Industry Marketing Manager
SEE RITU & TOM PRESENT AT THE IBF’S: