[Originally published in 2013, this white paper is still provides a vital POV on how to advance your thinking around forecasting )
Surrounded by an explosion of data, most forecasting systems have no way to leverage or take advantage of it. Businesses complexity is growing, driven by multi-channel marketing, the growing influence of Demand Shaping (Media, Promotions, NPI), and the impact of the internet on buying behavior - to name a few. To manage and ultimately profit from this complexity, marketing and sales departments are investing in modern data infrastructures to unlock valuable clues to customer sentiment and behavior, even including technologies such as machine-embedded telemetry and social media channels. Unfortunately most companies’ supply chain systems and processes haven’t begun to catch up. Most are still using forecasting approaches based on cumbersome algorithms and time series of aggregated sales history. This inability to integrate, analyze and take advantage of increasingly available data is causing forecast accuracy to get worse when it could be getting better. We see companies with Item-Location forecast accuracy (MAPE) of 70 percent or even less. Analysis from Lora Cecere of Supply Chain Insights shows that food manufacturing companies have “…lost 1% in operating margin and have increased average inventories by 22% over the last decade”. The good news is that most companies already have the data they need to achieve big improvements in forecast accuracy. Those wanting to move to the ‘next generation’ of forecasting to achieve greater demand and supply reliability have readily available data and powerful tools at their disposal.
Read the full article here, http://www.toolsgroup.com/images/four_stage_forecasting.pdf