Overcoming Forecast Error with Real-time Forecasting

Working to improve demand visibility at your company but stumped on how to improve demand accuracy? Here are some tips to get you started


Best known for its Hidden Valley Ranch dressings, Ventura Foods is a leading provider of edible oils, shortenings, dressings, margarine and sauces. Ventura has historically struggled with balancing consumer demand, coordinating a dozen manufacturing plants and negotiating with a volatile commodities market. A couple of years ago, it launched an initiative to improve customer service, stabilize manufacturing schedules and decrease inventory buffers. By improving planning systems and implementing real-time forecasting processes and systems, Ventura's increased visibility has resulted in better asset utilization and reduced risk of raw material cost fluctuations.

Charting a Better Forecast for the Future

Monthly S&OP processes and systems are no longer sufficient to meet today's demands. While AMR's Demand-Driven Supply Network provides a technology framework worthy of consideration, each organization must evaluate its goals relative to opportunities to generate short-term improvements.

Common issues for consumer products manufacturers include excess inventory, faltering customer service and lack of manufacturing predictability; each of these issues can be traced to forecast error. If your organization is faced with these issues and would like to take action, you may want to begin by determining the role and the extent of today's forecast error. If you are uncertain as to the error rate or the impact that it is having on your business, a solution provider should be able to help you quantify the problem. When you are ready to work with solution providers, work only with those vendors that know the industry, understand your business and have the intellect to determine scope of the solution.

In addition to quantifying the issue, you should also better understand how the S&OP process works at corporate planning sessions, and how these plans are being implemented by operations managers throughout the business. Identify the S&OP participants, gauge the accuracy of the monthly plan and determine how effectively these managers are driving results back into their own organizations. Remember to talk with operations managers to understand how well they receive and trust the information that they are given to do their daily jobs. When you are ready to work with solution providers, work only with those vendors that have experience with these processes, understand the impact of incorrect information and are realistic about the scope of effort required to drive change.

Prior to choosing a solutions provider, ask for an illustration of how its system would have generated results better than those generated by your existing systems. Work only with those vendors that are willing to benchmark their systems against your current environment.

About the Author: As President of Biddle Associates, Jane Biddle leverages her 25+ years of manufacturing and supply chain industry technology experience to provide advisory and consulting services to the firm's clients. Biddle works with technology executives to create product and market strategies; and with manufacturing executives to develop global IT strategies. Prior to Biddle Associates, Biddle was chief commercial officer for INTTRA. Previous positions include vice president of Marketing for G-Log and RockPort Trade Systems, Industry director for SAP and Research director for Benchmarking Partners, MRP/ERP Product manager for Digital Equipment, and Manufacturing consultant for Hewlett-Packard.

For more information on the supply chain execution market, read "Demand Management," part of the Analyst Corner Series, in the February/March 2005 issue ofSupply & Demand Chain Executive magazine.

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