Download - Ibf Mini Tutorial Webcast June 2009
IN ORDER TO IMPROVE THE QUALITY OF BUSINESS DECISIONS
Improving Forecast Performance
1
Elements of Forecast Performance
AccurateTimelyInternally ConsistentRealistic AssumptionsRisk SensitiveDemonstrates Range of Outcomes
Accuracy Forecasted Outcomes
2
Elements of Forecast Performance
Meets Diversity of User NeedsReflects Business Segmentations Used in
Management and Management DecisionsIncorporates Intelligence of Functional
GroupsReflects Expert Opinion & JudgmentCommunicated Clearly and Concisely
3
ACCURACY IS IMPORTANT!
But is not the sole factor in improving forecasting
performance
4
Measure, Track, and Evaluate Accuracy!
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Forecast to Take Advantage of the Pattern of Error!
6
Mean Average Percent Error(MAPE)
Source: IBF 2007 Survey
7
Employ Operational Metricssuch as……..
Customer Satisfaction RatingsOrder Fill RatesOrder Fill TimesCustomer Service CallsCustomer Service Response TimesInventory Levels & TurnsShipping TimesSpace Utilization RatesProduction and Storage Capacity Levels
8
Use Ranges…..Not Just Point Estimates
Forecast Ranges 99% Confidence (3sd) 95% Confidence (2sd) 68% Confidence (1sd)
Accuracy Ranges 99% Confidence (3sd) 95% Confidence (2sd) 68% Confidence (1sd)
9
Use Simulation ScenariosGather Key Concerns of Business TeamModulate Key AssumptionsEstimate Scenario Subjective Probabilities Evaluate Business Issues of Alternative
OutcomesFocus on Extremes - Best Case and Worst Case
OutcomesWork with Management on Hedging and
Business Action Strategies
10
QUESTIONS??
CSI-S&OP:Why S&OP failsA brief look some causes for failed S&OP processes
Diagnosis of S&OP?
Right definitions Will help understand what it is Will help drive the process
Reasonable expectations Will help set the agenda Will help drive accountability Will help push for follow up
Right people Not too many/not too few Communication is critical
Right Data
“Where does it hurt?”
How often is your S&OP? Who schedules it? How hard is it to move the meeting? What if you can’t attend?
Symptoms
Lack of Upper Management Support If it important to upper management it will viewed as
important to the whole company Sometimes decisions will be dramatic and need upper
management support to carry through
Remedy You need a sponsor from upper management who will
“Champion” the process Show some positive early results. Even though they
may not be quantitative. Begin engaging upper management in the process
Symptoms
Lack of Goals and Expectations Set specific goals/takeaways from the meeting Make goals reasonable and achievable Involve everyone in the expectations
Remedy Key Performance Metrics Follow ups
Symptoms
Incorrect or Irrelevant Data Balance between history and forecast (don’t
be too “forward thinking”) The correct forecast model Dollars vs. units Budget or Operating Plan
Remedy Continue to review the relevance of the data Update the data Don’t be afraid to use new data
Symptoms
Lack of Communication Make sure lower levels of management have clear
direction of the decisions made in S&OP Publish relevant data to those not in S&OP Make sure all departments communicate the same
message
Remedy Have team member specifically in charge of getting
communication into the right hands Publish something that it quick and easy to read
Symptoms
Lack of Consensus/Agreement Leave “politics” at the door Look at the “Big Picture” Don’t play the blame game
Remedy Check baggage at the door Build TEAMWORK If possible, cross departmental work
Symptoms
Incorrect Focus It involves the entire company. Needs to have direction
Questions
August 24 & 25, 2009
www.ibf.org/0809.cfm