With no precedent for the current circumstances, the best anyone can do is work with the reality they are presented with on any given day. Given the uncertainty and the speed at which the situation is evolving, dynamic forecasting has clear appeal. Static planning will not cut it anymore when there is nothing to base long-term predictions on.
Rolling forecasts, updated regularly, allow you to learn from the changes occurring in your markets and adapt as appropriate. Issues relating to historical factors can be fixed along the way and decision making is informed by an analysis of risks and opportunities, leading to more strategic activity.
A dynamic forecast also serves as the closest possible example of a single version of the truth – a shared point of reference across your organisation which will ensure all business elements are working off the same plan.
There is a note of caution to sound however – dynamic forecasting must be implemented in the right way to prove cost- and time-effective and bring true value to your business. The purpose of moving to this form of planning is to improve the speed and accuracy of decisions, not create more complexity for your finance function and key stakeholders.
Gartner have previously shared three key lessons around putting rolling forecasts in place and we thought they were worth highlighting.
Prioritise what and when
If you’re currently still operating in a spreadsheet-based system, trying to translate everything into a new dynamic forecast is going to require too much work with too much data. Instead, identify one particular area of the business you think would benefit the most from a more agile planning solution and start there. For instance, for a global manufacturer, distribution is likely to be an area of high uncertainty at the moment and would therefore be most usefully considered through the lens of a rolling forecast.
It’s an evolution not a big bang
Take the time to implement the new methods gradually; this is not a single step to take and then accept as completed. Your new forecasts will need to evolve through multiple iterations as you see how they are used and scaled out across the organisation.
It’s the output that counts
Although the initial work is necessary in establishing your new forecasts, ensure you focus more on analysing what the data is telling you rather than the mechanics of creating the system. Collaboration is required across your business to understand how all areas of the organisation will use the resource. How can risk and opportunity assessments be built into the process? How can you take single key drivers in the forecast, model them dynamically and then feed them back into the more static elements of your range and scenario-based planning?
How dynamic forecasting is being used at a time of crisis
We’re seeing up close how clients are changing the ways they are using dynamic forecasting to better tackle the current issues they face. Forecasts which used to be aimed at giving the board an overview of what was going on are becoming invaluable operational resources. Supply chain business units are using the insights provided to make informed decisions on the fly as the world adapts at speed to changing conditions.
Of course, this kind of planning quite simply cannot be achieved through a spreadsheet-based system. The sheer volume of data which needs to be updated on an ongoing basis is impossible to manage through spreadsheets. You may have previously thought that the technology was out of your business’ reach, but it’s not.
With the release of their Digital Planning Analytics offering, IBM have opened up access to the power and capability of Planning Analytics at a price that removes the barrier for even the smallest companies. Get in touch with us today to find out how we can support you on the start of your journey towards dynamic forecasting and more profitable decision making with IBM® Planning Analytics.