2018 Forecasting and Inventory Benchmark Study

Now in its eighth year, E2open’s 2018 Forecasting and Inventory Benchmark Study is the most consistent, comprehensive and useful study of its kind. The study encompasses over $250 billion in annual sales from global manufacturers across a variety of industries, including food and beverage, consumer packaged goods, industrial manufacturing, chemicals, and oil and gas.

This public version of the study provides the “state of the nation” for forecasting and inventory performance in North America. By aggregating data in a standard format directly from E2open’s Demand Sensing and Multi-Echelon Inventory Optimization applications, the study overcomes the pitfalls of self-reported information and creates a reliable benchmark to help companies in the pursuit of planning excellence.

The Limits of Traditional Planning

Pressure to raise productivity, reduce costs and improve service keeps climbing. The days of simply getting by on incremental improvements are over. Increasingly, CEOs are counting on the supply chain to go beyond delivering just products and become an engine for transformation, differentiation and profitability. Accuracy matters more than ever, because the quality of every business decision ultimately ties back to the quality of one or more forecasts.

Despite this pressure to perform, forecast accuracy and the value-added created by demand planning investments in people, processes and technology have remained essentially flat over the last five years, suggesting that companies have squeezed just about all the benefits they can out of traditional techniques. This performance falls short of even the most basic incremental improvement targets, let alone the loftier goals mandated by the board. It’s time to look beyond traditional approaches.

Measured Benef its of Automation and Machine Learning

Rethinking what’s possible in planning is especially relevant now that almost every company has some form of a digital transformation initiative under way. The term “digital transformation” means something different to everyone and varies from SAP® Advanced Planner and Optimizer (APO) replacement strategies to the full convergence of planning and execution. Regardless of the definition, there is new interest across industries in smarter software that uses machine learning and automation to step up performance.

Other than E2open’s Demand Sensing, there are not many proven scalable applications on the market yet, but this will surely expand because the benefits are so compelling. Case in point, while organizations struggle to eke out more from their investments in traditional demand planning, demand sensing provides a distinct step change in performance, cutting error by 36% and doubling forecast value-added (FVA).

Effect of Innovation on the Long Tail

Item proliferation continues to work against productivity, making planners’ jobs more difficult and actually increasing costs. New product launches continue to be a top priority as a way to get ahead and stay ahead of the competition. However, 94% of introductions end up in the tail (slowest moving items) in their first year, and with few ever breaking out to become faster sellers, the high rates of innovation only make the long tail even longer.