Using Demand Drivers for a Collaborative Forecasting Success

By using account specific demand drivers, your Sales Teams can forecast easily and more accurately ... sales Management will be more receptive to forecasting if they see the dollarized amount of savings resulting from forecasts ... trust between the Sales and the forecaster is the key to the success of a forecasting function. The objective of forecasting is to bring a broad perspective to decision-making, given the uncertain environment surrounding sales. Forecasting is an integral part of the Supply Chain Management, and companies need a forecasting process that provides effective and timely communication from all facets of the business. Every company would like to have an accurate forecast. However, given the dynamic nature of sales, there is no accurate forecast. With the help of an Advanced Planning Tool, and with effective communication amongst the Supply Chain Management department and Sales, companies can have the most effective forecasts. As business-forecasting processes continue to be refined, more emphasis than ever is placed on Collaborative Forecasting. Processes such as Collaborative Planning, Forecasting and Replenishment (CPFR), Vendor Managed Inventory (VMI), and Co-Managed Inventory (CMI) are now becoming a mandate of many major retailers. The resulting challenge for CPG vendors is to utilize customer data such as Point-of-Sales and Store Inventory Projections (based on their promotional plans, display orders, and new store openings) in their own forecasting efforts. All of these inputs then must be incorporated in the statistical models, embedded in the vendor's Advanced Planning Tool. How should the Demand Planning Team effectively analyze all of this data/information? One way is to involve Field Sales and Sales Management in the forecasting process. SELLING FORECASTS TO SALES MANAGEMENT It is critical that Sales Management understands the benefits of forecasting. Often times, forecaster faces a strong resistance from Sales Management. At Fuji Photo Film, we have developed a four-step process to overcome this obstacle: 1. Understand their concerns. 2. Address their concerns. 3. Demonstrate the impact of forecasts. 4. Build rapport. UNDERSTAND & ADDRESS SALES MANAGEMENT'S CONCERNS (Steps 1 & 2) If you have the patience to listen, you are capable of completing the first step. The first step is to make an effort to meet with Sales Management, and listen to their concerns for becoming a part of the forecasting process. Here are some of the key concerns of the field sales: 1. Forecasting is time-consuming. It eats up a lot of time that would have been otherwise spent in driving sales. 2. Forecasting is not our expertise. It's your job. Why should we help you in doing your job? 3. Forecasting does not impact sales, and, therefore, it adds no value to us. On the surface, it appears very important to address these concerns as soon as they surface, but our experience is on the contrary. If you try to answer them during the initial meeting, you will be perceived as either defensive or combative. Then, most likely Sales Management will be reluctant to offer their help. Therefore, the first and foremost step should be to understand their concerns, which you can address at another time. The reality is that sales reps only need to spend a few hours a month to forecast effectively. Conversely, if accuracy suffers due to a lack of sales forecasting, the result will be stock-outs, allocation, and/or excess inventory markdowns. To deal with these issues will certainly take more than a few hours a month for reps. In addition, they face the possibility of losing goodwill with their accounts. To address the Sales' concern that forecasting is too time-consuming, you need to show an easier method for forecasting. Rather than taking the traditional approach of generating forecasts with time-series models, show them the approach that consumes less time, but at the same time yields forecasts that are more accurate. …