Forecasting Best Practices

Topics: Supply chain management, Forecasting, Inventory Pages: 7 (2091 words) Published: May 19, 2005
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 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 just to report accuracy. 2.The people must be committed to one process.

3.A forecast "champion" who has the support of upper management should be identified. 4.The right tools must be utilized, including forecasting software, supply chain software, and communication software. They have also developed a monthly process with specific steps to be followed each week: Week 1: Forecasts are used to build and maintain a quantitative forecast, a consensus forecast, and an annual operating plan based on KRMs. Week 2: The information is reviewed by sales and supply chain management . SKU level information (unique promotions, new customers, etc) is added. Week 3: Consensus team meetings are held.

Week 4: The forecast is disaggregated to distributor levels and is pushed to the ERP system. Inventory and production schedules are optimized.
Rayovac has seen improvements in communication among all functional areas, a combination of technology with human intuition and expertise. They also have shared responsibility, goals and risks. Their forecasts are now integrated and reconciled. Coca-Cola Bottling Co. Consolidated

At Coca-Cola Bottling Co. Consolidated (CCBCC) has developed a forecasting system to change their previously decentralized forecasting and production processes. Their new centralized forecast allows the company to have more visibility throughout all facilities and the company can now be more proactive.

Their process involves marketing and customer-development groups feeding in price plans from the CCBCC's largest customers. Estimated demand, known promotions, and price points, new product introductions, and other inputs are added. They then forecast out 17 weeks, with attention focused on the next four weeks. The forecast is updated weekly and sent to area sales managers who review it and modify it as needed four weeks out. This allows a personal aspect to the technological system.

Allowing the forecast to...

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.
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