Forecasting – reporting on or running the business?

We are seeing shifts in the way forecasting is being used, with evidence of a growing appreciation of the value of forecasts to the wider business rather than just at the top level.

It remains the case that every company’s board needs to use a forecast as a checkpoint for measuring progress. This tool is sent upwards within the company and primarily used to hold people and departments to account and used as the basis for agreeing next steps.

Traditionally, the forecast then cascades downwards into the separate functions in the form of targets and deliverables. The head of each team, keen to avoid scrutiny next time they’re sitting round the table at a board meeting, will be pushing their staff to hit forecast, the data being used as a top-down performance driver.

Driving operational decisions

Increasingly, companies are adapting and becoming more dynamic to address the current uncertainty. Take the example of one of our customers, a large international retailer, who are now using their rolling forecast as a day-to-day operational tool. Static snapshots are still used for management meetings to gauge progress and perform certain benchmarking exercises. But there’s a wider application, with the organisation using the data to hand to make informed and up-to-date decisions on factors including distribution channels, which warehouses to open, required staff levels and optimisation of shift patterns.

With the world in constant change at the moment, it’s important that decisions are being made at operational level based on a centralised single version of the truth. Forecasts can never be 100% accurate, but ultimately they’re the closest picture available and a dynamic, rolling forecast process allows everyone to work from the same best version. If each function were making decisions based on siloed forecasts which were already obsolete by the time they were being considered, then no-one would be in step with each other and profitable opportunities would be missed.

With an agile system, a decision taken a week ago to send stock to a particular location based on the forecast at that time can be revised and altered as more information becomes available. The stock can then be diverted to a more relevant distribution centre mid-week in a proactive response to the changing situation.

Optimise your planning to give yourself the advantage

For any online retailing model, those who thrive in the coming months will be the companies who are capable of meeting and then exceeding their customer expectations. The consumer is not interested in your logistical concerns, they just want their goods, and fast. When dealing with worldwide supply chains, this necessarily requires complex planning and optimisation.

In order to implement and exploit rolling forecasts to their full potential, your finance function need to be receiving as close to real-time feeds as possible from your operational systems; they need to be able to gain a multidimensional view of the data to be able to analyse it fully; and they need the capability to provide the resultant information in formats which are appropriate for different areas of the business. Warehouse managers will want a clear picture of the situation on which to base their decisions – not an impenetrable mass of data.

If you are currently expecting your finance team to deliver from a spreadsheet-based system then perhaps now is the time to equip your team properly with access to Planning Analytics. The system will not only give your staff the capability to run agile forecasts to drive profitable decision making but will also free up their time to be spent on value-added analysis. IBM’s Planning Analytics Digital offering has opened this tool up to enterprises of all sizes.

We envisage that as patterns start to emerge within the new ways of working and things become more predictable, behaviour will evolve within the most successful companies and certain activities which were born of crisis will become standard. One of these is a greater engagement in the forecasting process from operational stakeholders as businesses recognise the value of the forecast being spread outward rather than just upward to drive up to date, profitable decision making. To take the first steps on your journey to a more agile method of working, get in touch today.