Game Plan for a Successful Collaborative Forecasting Process (2001)

To determine goals, review the past issues, that is, what in the past caused a loss of revenue, or added to supply chain costs and/or delayed products getting into the market... make sure all the partners, internal and external, are on the same page ... continuous analysis of business may provide some directions for improving the supply chain. In business forums and logistic discussions we are often asked, can we make the collaborative forecasting process work? In this article, we will not show any new algorithm for forecasting but describe how to address some of the organizational and procedural pitfalls encountered in the process of implementing a collaborative forecasting process. Also, we will share the approach we used which proved to be very successful. After the foundation for collaborative forecasting and planning is laid down, a proper game plan for its execution needs to be formulated. Three main pillars of this foundation are: 1. A firm commitment from upper management. This is essential because it may require additional resources in terms of manpower, adding new software and/or upgrading the old one. 2. A team of people from various functions who are not only dedicated and enthusiastic about collaborative forecasting but also are willing and ready to do whatever it takes to make it successful. 3. A commitment to communicate with your internal and external partners. In putting together a team, make sure to include people from as high in the ranks of the organization as possible. Their commitment will send a powerful signal to the rest of the team that this process is both important and worthwhile. Once the foundation has been established the next step is to develop a game plan so that the process is carried out correctly and efficiently to the best interest of all of the participants. The seven steps for developing such a game plan are listed below: STEP 1 DEVELOP GOALS AND GUIDELINES The first step is to establish goals and guidelines, that is, what needs to be accomplished and how. The goals may be to improve forecast accuracy, reduce inventory, enhance customer service, cut down transportation and procurement costs and improve demand planning. To come up with the right goals and guidelines, all the members of the team should discuss openly and without any hesitation. You should review the past issues such as what in the past caused a loss of revenue, added to the supply chain costs and/or delayed products from getting to the market on time. In a free and open discussion, you may be surprised what kinds of issues may surface. You may start out focusing on forecast accuracy, but by the time you are finished you may have touched on issues pertaining to supply chain as well as to many other functions. From this, you should develop a joint vision and a formal statement of objectives, guidelines and approaches to be followed. In developing goals, do not hesitate to be overly ambitious. Throw every conceivable idea on the table. Here are some of the questions you should be asking: 1. Do we need to improve current forecast accuracy? 2. Are inventory turns or distribution cost our concern? 3. What are your inventory and distribution costs, and inventory turns? Today you are turning inventory 4 times, and by the end of year, you may want to be turning 13 times. 4. How many distribution points do you really need? 5. Why is transportation cost $1.45/Lbs? 6. Where do you see yourselves next year? The beauty of this process is, if all the objectives are worked out and agreed upon jointly, then their buy-in is assured. Simply establishing objectives is not sufficient. You have to establish proven measurements to measure the progress so that you know where you started and what progress has been made. STEP 2 FORMULATE A LIST OF PROCESSES AND PRACTICES Once the goals and guidelines are set, the next step is to formulate a list of processes and practices to achieve them. …