Question:
Dear Dr. Jain,
I am the demand planning manager at a FMCG company. We are expanding, taking on several new forecast analysts in an attempt to bring the function to maturity. I am lobbying management to increase the training budget (which I feel is a must for our new hires) but facing push back. How can I convince them that training will be a good investment, and is there any data I can show them that relates training to forecast accuracy or ROI?
Answer:
Hi,
We recently completed a research report that attaches a value (percentage improvement in forecast accuracy) to specific initiatives.That is to say, if we carry out a particular activity in demand planning (like training or implementing a particular forecasting method) we can gauge the likely improvement it will have on forecast accuracy. IBF training, for example, has been statistically proven to improve under-forecasting by nearly 1.5%, representing average savings of $5.28 million. There are also significant differences in forecast accuracy depending on the forecasting method used – the decomposition model provides an average error of 17.72% whilst the naive model comes in at 28.22%. If you use a naive model currently, you have a huge opportunity to drive massive savings.
Those figures speak for themselves and should be an easy sell to leadership – you can download the report here. Also take a look at IBF’s forecast accuracy calculator. Input your likely forecast error improvement and it’ll show your likely dollar savings amount.
I hope this helps.
Dr. Chaman Jain,
St. John’s University