Why You Need To Consider External Factors in your Forecasting
Companies like UPS and FedEx are experiencing massive changes. What external factors are driving these changes? The answer lies in macroeconomics. This is the single most important issue for supply chain forecasting today and I will share some of the concepts we utilize at FedEx with you here.
What I will explain is how macroeconomic factors affect your company’s sales, and how you can gauge them and use them to forecast demand. Macroeconomic factors include:
- U.S. Retail Sales
- Wholesales inventory
- Unemployment rates
- Consumer sentiment index
- Oil price
Analysts at industry level look for causal factors that explain changes in demand for a given set of products or services. This may be done on a local, national, or even international level. The economic and social variables that are deemed most important—those that historically have shown the most influence on demand—are then incorporated into some type of model that attempts to predict future purchasing activity.
The simplest example would be to consider the influence of widely observed macroeconomic indicators such as GDP, unemployment rates, consumer sentiment index, oil price etc. From 2012-2014, e-commerce sales increased by about 102%, whereas during that same period the number of “Web,” or e-commerce-type stores shot up by 1,354 percent. Would you know how to use this data to forecast demand?
The Big Questions you Want Answering
The key question becomes what do we do with this information? Are the macro indicators helpful to company’s sales forecasts? If they are, how do we model them? How does forecasting use this data to enhance a company’s profitability? These are the core questions that I will deal with at the upcoming Predictive Business Analytics, Forecasting & Planning conference in Atlanta.
We build econometric models to find a long relationship between macroeconomic indicators and a company’s performance (sales or revenue) in the transportation industry to better service our business plans.
I will be speaking at IBF’s Predictive Business Analytics Forecasting & Planning Conference, Atlanta from April 21-22, 2016. I’ll be talking about:
- The background to macroeconomic forces affecting your company’s revenue
- Application of predictive business analytics in U.S. E-Commerce, marketing and influencing product demand
- Real evidence of economic relationships between company’s sales and U.S. retail sales, wholesale inventory, oil price and other macroeconomic indicators
I am already getting excited about speaking at the IBF Conference. The theme is Predictive Business Forecasting and I am looking forward to getting to the heart of some innovative concepts and how we can apply to them our forecasting.
The IBF Conferences always add value to what I do and I find that spring is the perfect time to approach new concepts with a clear head and start the year as we mean to go on. At the Conference, I will be tackling some pretty advanced topics, but hopefully in simplified language. The idea is that you can take these ideas back to your department and use them to your advantage. This conference is typically an opportunity where the ideas that underpin forecasting are aired and discussed before they become standard in the industry, which is why it’s an honor to be able to add some value. I encourage you to register, if you haven’t done so already.
I look forward to meeting you at the conference! Your comments and questions are welcomed.
The IBF wants to make it as easy as possible for you to get involved with our members, industry leaders, and world-class knowledge that we are discounting the Predictive Business Analytics Forecasting & Planning Conference Silver package by 50% for non-members and first-time attendees.