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Here's a presentation from Trevor Miles, director of thought leadership, Kinaxis called "Is Forecasting Fatally Flawed?" Want to see the webcast version of this presentation? Visit: http://www.kinaxis.com/campaign/on-demand-ResponsivenessDemandForecasting/

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  • 1. Copyright 2011 Kinaxis Inc. All Rights Reserved. 1

2. Is Forecasting Fatally Flawed? Responsiveness The Other Half of the Demand Forecasting Conversation Trevor Miles director, thought leadership e: [email protected] | m: +1.647.248.6269 | t: @milesahead Copyright 2011 Kinaxis Inc. All Rights Reserved.2Copyright 2011 Kinaxis Inc. All Rights Reserved. 3. Agenda Business Drivers Why Continuous? Why Collaborative? People, Process, Technology Continuous and Collaborative S&OP Copyright 2011 Kinaxis Inc. All Rights Reserved.3 4. Business Drivers Copyright 2011 Kinaxis Inc. All Rights Reserved.4Copyright 2011 Kinaxis Inc. All Rights Reserved. 5. Todays multi-tier global supply chainPervasive, global outsourcingProduct portfolio proliferation Shrinking product lifecycles Increasing demand volatilityCopyright 2011 Kinaxis Inc. All Rights Reserved.5 6. Market dynamics Top CPG companies forecast performance Terra MAPE for a one month lag was 31% + 12% Forecast Error Range: 19% - 43% Eight years ago: 36% + 10% MAPE High-Tech/Electronics anecdotal Struggle to get better than 50% MAPE Where will breakthrough performance come from? Learning to forecast and plan better? Learning to respond profitably to plan variance? Copyright 2011 Kinaxis Inc. All Rights Reserved.6 7. Companies cant predict thefuture,build organizations that willsurvive and flourish underany possible future.Source: McKinsey Quarterly, Dynamic management: Better decisions in uncertain times, December 2009 Copyright 2011 Kinaxis Inc. All Rights Reserved.7 8. A volatile economy makestraditional budgetsobsolete before theyre evencompleted. New approaches: 1. Scenario planning with trigger events 2. Zero-based budgeting 3. Rolling forecasts 4. Quarterly budgetingSource: McKinsey Quarterly, Just-in-time budgeting for a volatile economy, Spring 2009Copyright 2011 Kinaxis Inc. All Rights Reserved. 8 9. Markets not affected equallyCopyright 2011 Kinaxis Inc. All Rights Reserved.9 10. Markets not affected equallyCopyright 2011 Kinaxis Inc. All Rights Reserved.10 11. Markets not affected equallyNo matter how accurate the forecast, demand volatility will remain.Copyright 2011 Kinaxis Inc. All Rights Reserved.11 12. Standard demand segmentation 80% of Volume 80% of Variability Each point is a specific SKU Coefficient of variation = Std.Dev./MeanCopyright 2011 Kinaxis Inc. All Rights Reserved.12 13. Standard demand segmentation Make-to-Stock Configure-to-Order Pull Make-to-Order Rationalize? Each point is a specific SKU Coefficient of variation = Std.Dev./MeanCopyright 2011 Kinaxis Inc. All Rights Reserved.13 14. Standard demand segmentation Make-to-Stock Configure-to-Order Pull Make-to-Order Rationalize? Each point is a specific SKU Coefficient of variation = Std.Dev./MeanCopyright 2011 Kinaxis Inc. All Rights Reserved.14 15. Demand segmentation Demand forecast (units)Hi scenario 400Uncommitted 300Flexible quantity 200 Base scenariocontract 100Fixed quantityLo Scenario contract0Time Venu Nagali , Procurement Risk Management (PRM) at Hewlett-Packard Company, Stanford Risk Management Roundtable, November 13, 2006Copyright 2011 Kinaxis Inc. All Rights Reserved.15 16. Supply chain segmentation400 HiHi300 HiBase200BaseLo100Lo Base Lo 0 Time Time Time Where will breakthrough performance come from? Learning to forecast and plan better? Learning to respond profitably to plan variance?Copyright 2011 Kinaxis Inc. All Rights Reserved.16 17. Why Collaborative? Copyright 2011 Kinaxis Inc. All Rights Reserved.17Copyright 2011 Kinaxis Inc. All Rights Reserved. 18. Why collaboration?Copyright 2011 Kinaxis Inc. All Rights Reserved.18 19. The Bullwhip Effect at work Christoph Glatzel, Stefan Helmcke, and Joshua Wine, Building a flexible supply chain for uncertain times, McKinsey Quarterly, March 2009Copyright 2011 Kinaxis Inc. All Rights Reserved.19 20. The Bullwhip Effect at work J Forresters Industrial Dynamics (1961) Central message: Multi-Tier Visibility Collaboration Christoph Glatzel, Stefan Helmcke, and Joshua Wine, Building a flexible supply chain for uncertain times, McKinsey Quarterly, March 2009Copyright 2011 Kinaxis Inc. All Rights Reserved.20 21. S&OP balancing competing goals Goal: Make the financial budget. Top-down focus. Wants: Control and predictability of operations Forecast: The budget/annual operating planFinanceGoal: MaximizeGoal: Minimize supplyrevenue and marketchain costs, often Demandshare SideinventorySales andOperationsWants: Guaranteed Marketing SupplyWants: Minimumproduct availability Side demand uncertaintyForecast: Sales planForecast: Supply plan Supply Chain Goal: A feasible plan. Bottom-up focus Wants: Minimize risk and disruption Forecast: The demand planCopyright 2011 Kinaxis Inc. All Rights Reserved.21 22. S&OP balancing competing goals Goal: Make the financial budget. Top-down focus. Wants: Control and predictability of operations Forecast: The budget/annual operating planFinanceGoal: MaximizeGoal: Minimize supplyrevenue and marketchain costs, often Demandshare SideinventorySales andOperationsWants: Guaranteed Marketing SupplyWants: Minimumproduct availability Side demand uncertaintyForecast: Sales planForecast: Supply plan Supply Chain Goal: A feasible plan. Bottom-up focus Wants: Minimize risk and disruption Forecast: The demand planCopyright 2011 Kinaxis Inc. All Rights Reserved.22 22 23. Why Continuous? Copyright 2011 Kinaxis Inc. All Rights Reserved. 23Copyright 2011 Kinaxis Inc. All Rights Reserved. 24. S&OP in the overall planning processBusinessTactical Strategy Planning S&OP Planning ExecutionDegrees of FreedomFinancialCapacitySourcingScenario Planning Inventory ProductDemand Copyright 2011 Kinaxis Inc. All Rights Reserved.24 25. Integrated business planning the goal Integrated Business PlanningBusinessTactical Strategy Planning S&OP Planning Execution Scenario PlanningDegrees of Freedom FinanceCapacitySourcingInventory ProductDemand Copyright 2011 Kinaxis Inc. All Rights Reserved.25 26. Traditional planning process segmentationCopyright 2011 Kinaxis Inc. All Rights Reserved. 26 27. Traditional planning process segmentationCopyright 2011 Kinaxis Inc. All Rights Reserved. 27 28. Traditional planning process segmentationCopyright 2011 Kinaxis Inc. All Rights Reserved. 28 29. Continuous and collaborative S&OPCopyright 2011 Kinaxis Inc. All Rights Reserved. 29 30. Continuous and collaborative S&OPCopyright 2011 Kinaxis Inc. All Rights Reserved. 30 31. Process, People, Technology Copyright 2011 Kinaxis Inc. All Rights Reserved.31Copyright 2011 Kinaxis Inc. All Rights Reserved. 32. Gartner: Most companies stuck at stage 1 or 2Larry Lapide Demand Management Solutions Group 2008Copyright 2011 Kinaxis Inc. All Rights Reserved.32 33. Relative importance of technology Larry Lapide Demand Management Solutions Group 2008 Copyright 2011 Kinaxis Inc. All Rights Reserved.33 34. ProcessPeopleTechnologyCopyright 2011 Kinaxis Inc. All Rights Reserved. 34 35. ProcessPeopleTechnologyCopyright 2011 Kinaxis Inc. All Rights Reserved. 35 36. [technology] the web will changenothing until we use itfor that purpose Source: http://www.euansemple.com/theobvious/2011/1/20/does-the-web-change-everything.html Copyright 2011 Kinaxis Inc. All Rights Reserved.36 37. Copyright 2011 Kinaxis Inc. All Rights Reserved. 37 38. Copyright 2011 Kinaxis Inc. All Rights Reserved. 38 39. Technology choice means Different skills/people Different processes Different results Copyright 2011 Kinaxis Inc. All Rights Reserved. 39 40. Continuous and Collaborative S&OP Copyright 2011 Kinaxis Inc. All Rights Reserved. 40Copyright 2011 Kinaxis Inc. All Rights Reserved. 41. If I had asked people what they wanted, they would have said faster horses. - Henry FordCopyright 2011 Kinaxis Inc. All Rights Reserved.41 42. Continuous and collaborative S&OP AND, not ORCollaborative, not linear Event-driven, not calendar-drivenEffective, and efficientCopyright 2011 Kinaxis Inc. All Rights Reserved. 42 43. Copyright 2011 Kinaxis Inc. All Rights Reserved. 43 44. Thank you! Questions? Trevor Miles | e: [email protected] | m: +1.647.248.6269 | t: @milesahead Copyright 2011 Kinaxis Inc. All Rights Reserved. 44Copyright 2011 Kinaxis Inc. All Rights Reserved. 45. Watch my recorded presentation from the High-Tech Forecasting & Planning Summit here:http://www.kinaxis.com/campaign/on-demand- ResponsivenessDemandForecasting/Copyright 2011 Kinaxis Inc. All Rights Reserved. 45


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