Jeff Metersky, Vice President, SIOP Practice
Friday, August 31, 2012
Demand variability and forecast accuracy are consistently ranked as top supply chain challenges. What is it about the S&OP discipline of demand planning that causes supply chain executives to throw up their hands? Many experts will pin it on three predictable culprits: “people, processes, and technology.” While I agree that enabling technology, skilled resources, and collaborative processes all contribute to an organization’s ability to effectively forecast demand, some of my recent experiences have shown that there are additional factors to consider.
Over the last several months, I’ve had the chance to be a part of ground-breaking research that is digging deeper into the underlying drivers of forecast accuracy and bias. The Sales & Operations Variability Consortium (S&OVC) – a benchmarking and analysis peer group comprised of leading CPG manufacturers – has come together to benchmark, analyze, and predict forecast accuracy and bias as well as identify effective responses to demand variability. From my front row seat in this study, I’ve come to realize that the key to improving demand planning performance is understanding how the characteristics of your company’s products and customers impact the complexity of your demand planning environment.
Unfortunately, most demand planning benchmarks create a sort of “apples-to-oranges” comparison trap. That is, traditional benchmarks don’t consider how a company’s unique forecasting environment is affected by such operating characteristics as product mix, demand profiles, and forecast time buckets and horizons. Also, most of them are self-reported metrics which are highly prone to differences in calculations.
The good news is that the S&OVC addresses these common pitfalls. To learn how, I invite you to join me at IBF’s Supply Chain Planning & Forecasting Best Practices Conference in October. Kate Mahoney, Manager of Demand Planning at Church & Dwight, and I will be discussing how Church & Dwight has leveraged actionable insights from the S&OVC to gauge its demand planning effectiveness as well as identify and prioritize improvement opportunities.