The Power of Insight – Statistical Forecasting as Part of Integrated Demand Management
Success in today’s consumer-driven business climate depends on meeting customer demand as efficiently and profitably as possible. Accurate demand planning is vital; not only does it provide the very foundation on which future plans can be made, it allows the business to anticipate changes in demand in plenty of time and respond accordingly.
Not the silver bullet
Success in today’s consumer-driven business climate depends on meeting customer demand as efficiently and profitably as possible. Accurate demand planning is vital; not only does it provide the very foundation on which future plans can be made, it allows the business to anticipate changes in demand in plenty of time and respond accordingly. For most organisations, statistical forecasting has a role to play in this forward view of demand. But fully understanding the shortcomings of statistical forecasting, as well as the benefits, is critical to getting the best from it – and avoiding a potentially disastrous forward picture of demand. Statistical forecasting is an essential element in maturing the organisation’s demand process, but crucially it needs to be part of a wider integrated approach to demand management, led and managed by those closest to the consumer, and embedded cross functionally into the organisation. This means addressing people and processes first.
The power of insight
In many organisations, there is a tendency for an over-dependency on computer-generated forecasts. Whether blind faith or optimism (perpetuated by software companies, perhaps?), to assume the computer knows best is a dangerous business. Like blaming the weather forecast for not taking an umbrella out, it’s no good pointing the finger at the computer when there isn’t enough stock to meet customer demand.
One of the most common problems is that organisations consider statistical forecasting to be a non-value-added administrative process for the IT department to manage. Of course, the IT department has little or no knowledge of the broader business in order to apply any interpretation of the data. And, without the intelligence, the forecast is just a number. The computer really doesn’t know something you don’t; applying intelligence is vital, and the detail must be scrutinised and challenged.
Andy Walker has over 25 years of experience in a diverse range of business disciplines. With a background in finance, demand, and supply chain management, he has delivered substantial gains for clients in efficiency, cost reduction, and customer service.
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