The Value of Collaborative Forecasting

Some vendors of forecasting software go out of their way to envelop forecasting in a geeky, esoteric, statistical fog. 

When you set out to forecast sales, are you really trying to decompose time series into level, trend and seasonality? Is your aim to detect null and alternative hypotheses in tests of autocorrelation? No. The true goal of any sales forecasting exercise is to forecast human behavior.

Of course, while the simple acknowledgement that forecasting is "the science of forecasting human behavior" might make it easier to relate to the challenges a forecaster faces, that doesn’t make the challenge itself any less daunting.

DS BlogIn a "Time" magazine Q&A, physicist Stephen Hawking responded to a question about how it feels to be expected to have all the answers (including answers about human behavior):

“I certainly don’t have the answers to all life’s problems. While physics and mathematics may tell us how the universe began, they are not much use in predicting human behavior because there are far too many equations to solve. I’m no better than anyone else at understanding what makes people tick.”

So … if even Stephen Hawking raises a white flag at the prospect of forecasting human behavior, what are we mere mortal managers supposed to do?

Hey, how about … involve those humans who have unique insights and a vested interest in the behavior of our customers?

In the supply chain arena, the two most critical questions about human behavior are

How much will they buy?

 … and …

When will they buy it? 

Whose job is it to answer these questions?  Who has the most direct interaction with the decision-makers at your customers?  Whose job is it to guide and shape your customers’ buying behavior? 

At most companies those responsibilities rightly fall to the sales force.

Do you include your sales force in your forecasting process?  

Since many of your key customers might be willing to at least share their guidance to those questions, do you provide a means for them to provide their direct input and insight into when and how much they’ll buy? 

Do you provide your sales force or key customers with feedback on how (ahem) “helpful” their forecasts have been? 

Sales people typically interact with the decision makers who most directly affect your future demand. If they’re really good, your sales people also guide and shape your customers’ demand.

By incorporating the collective wisdom of your sales people and customers in a collaborative forecasting process you will benefit from more accurate and timely predictions of the behavior of the people who most significantly affect your demand. Your forecasts will be enriched by these insights into human behavior.

 

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Bill Whiteside was introduced to Demand Solutions in the late 1980s when he purchased the software for a dairy products company (his employer at the time) in Lancaster, PA. On Jan. 1, 1990, he made the ultimate product endorsement by starting a business to market and support Demand Solutions in the Northeast U.S. In his sales, marketing, and support roles, Bill has worked with more than 400 companies across a diverse group of industries.  He writes and speaks frequently on forecasting and supply chain planning topics. Download and read Bill's "12 Supply Chain Forecasting Lessons" white paper today.

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