Forecasting Poetry

The variables in demand forecasting are endless. We have advanced planning systems to manage many of them and processes like demand shaping, demand sensing, demand control, demand management or S&OP/IBP to influence or come to consensus forecast.

There is research from Paul Goodwin, professor of Management Science at Bath University that suggests better not to touch system forecast at all, if changes to the forecast are relatively small. Some companies know this and have started to measure forecast value add (FVA) percentage to monitor the amount of forecast changes and the additional value this brings to accuracy.

In the end, who decides if a trend ends or changes direction, if a promotion is successful, the value of POS scan data, buy in patterns, phasing of NPD’s, de-listings and customer and consumer buying behaviour? I’ve seen it in a dozen of countries across several multi billion dollar companies. Technical capability and analysis is available, but once the cross functional politics and behaviour kicks in; there is not always room for logic in demand forecasting and it’s hard to come to consensus on the number.

Only when the realization has come that forecasting is not about the numbers, but about the assumptions behind the numbers, the discussion becomes more constructive and consensus becomes easier. At the same time, when discussing assumptions, the need to touch the forecast evaporates.

Until your business talks forecast assumptions rather than numbers, its maybe better not to discuss, analyse, optimize and try to convince each other. Maybe it’s just better to be silent for a while and let forecasting poetry teach you about assumptions:

“A trend is a trend is a trend.

But the question is, will it bend?

Will it alter its course

through some unforeseen force

and come to a premature end?”

Alec Cairncross (1969)

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