Forecast Errors
Volume 2, Issue 6, February 9, 2015
A forecast error is the difference between the actual and predicted value. The consequences are expensive inefficiencies that can be resolved with lean manufacturing technology.
Inventory Shrinkage Can be Catastrophic
IMPO Magazine reported that for manufacturers, employee theft isn’t the only potential problem regarding inventory. Complex production processes and the sheer volume of products and materials in the warehouse can make it hard to get a handle on inventory. This can result in inventory shrinkage, where the actual number of items on your shelves is lower than the number of recorded items. In the manufacturing world, shrinkage can also refer to the loss of raw materials, such as metal or food ingredients, during the production process. Regardless of what went missing or how it went astray, even small amounts of inventory shrinkage have a big effect on the bottom line. Read more.
Sales Forecasts Stink
Jason Jordan recently shared in Business2Community one of the likely reasons sales forecasts stink. Sales forecasting is an activity that consumes an enormous amount of management’s time, yet few organizations are happy with the accuracy of their collective forecasting efforts. So how is it that sales forces can expend so much effort on forecasting and still produce revenue predictions that stink? To find out, Vantage Point recently turned its research engine toward sales forecasting in an effort to identify the sources of forecasting failure as well as the best practices that can make sales forecasting more accurate. Many sales forces are using forecasting models that don not reflect the way their sales forces actually sell. The predominant forecasting approach is to build the sales forecast from a pipeline of opportunities that are being actively pursued by the sales force. Each opportunity is slotted into a stage of the company’s sales process, and a percentage is then applied to the deals in each stage to generate a probability-adjusted revenue prediction. Research shows that 85 percent of business-to-business sales forces currently forecast using this tried-and-true method. Read more.
Costly Retail Forecast Errors
Sales forecasts are not just toting numbers and planning for a peak retail season, according to Prakash Menon in a special feature for GulfNews.com. Menon suggested one must be absolutely forensic about daily sales forecasts in the lead up to any major festive day as this number will determine staffing and inventory levels. If sales forecasts are not rigorously planned and regularly monitored, holding a ‘sale’ event could be detrimental to the business. There are the extra wages that would need to be paid and the issue of unsold stock clogging the pipeline. This is exacerbated during any festive season when extended trading hours and greater consumer spending creates the need for stronger and more frequent due diligence around stock and staffing levels. Imagine a forecast plan that calls for all hands on deck and the shelves to be stocked to the hilt, only to find that consumers no longer want that particular product and have eyes on another item the planning team had not anticipated. Read more.
Big Data Took Center Stage at IBF Best Practices Conference and Leadership Forum
The Institute of Business Forecasting & Planning – IBF Blog, recently had Tom Savage discuss the IBF Best Practices Conference and Leadership Forum in Orlando. There were consummate professionals and experts in the field from companies such as L’Oreal, Coca-Cola, Motorola Mobility, Tastykake, Hershey’s, and Tempur Sealy International just to name a few. Collectively there were hundreds of years of experience all in one place and very willing to share their experiences and expertise. There was a new underlying commonality between speakers, something new that every company had to address at some point in their forecasting journey. What was linking nearly every presentation, speaker, and company together was the move to big data. Read More.
Move from forecast errors to demand driven accuracy:
Email: ultrivasales@ultriva.com | Tel: (408) 248-9803 | Website: ultriva.com | 