Although forecasting isn’t everything, it is the main shaper of how a company serves its customers, exploits opportunities, and drives performance. Sales, Finance, Manufacturing, Logistics, and Marketing teams are all enhanced or diminished by the quality of their company forecasts.
For instance, Logility’s experience with hundreds of organizations across many industries shows that typical benefits from a 15% improvement in forecast accuracy can include: a 15%+ reduction in inventory, a 10%+ service level improvement, and a 20% increase in order fill rate.
Why can’t all companies reap these forecasting rewards? We have found five common barriers that often stand in the way of an organization moving beyond basic forecasting accuracy:
- The real value of forecasting is often hidden from executive management.
- Forecasting expertise is difficult to hire, train, and retain.
- Forecasting tends to be decentralized, lacking an executive champion.
- Using Excel as a forecasting “system” is not a best practice.
- Companies tend to use an inadequate mix of forecasting techniques.
The actions outlined in this paper help overcome these obstacles. Recommendations include using business models to raise forecasting awareness with the executive team, developing an executive champion, implementing an advanced statistical forecasting solution, and automatically changing forecast methods during each product’s lifecycle to generate more accurate predictions.