Mike Gilliland AKA: The BFD

For those of you on LinkedIn, be sure to sign up for the Institute of Business Forecasting and Planning discussion group.  This is an active (and addictive) forum for sharing information and perspectives on a wide variety of forecasting & planning topics. The following question was posted by  Reno DiGenova, the VP – Replenishment, Inventory & Demand Planning at Geneva Watch Group, and has garnered 27 responses:

What are your thoughts on changing sales forecast in the same month and why?

The more general question is:  Should you ever freeze your forecast?

It is definitely appropriate to freeze a forecast at some point for measuring forecasting performance. (Otherwise, we could wait until the actuals came in and always hit 100% accuracy.)  The usual practice is to freeze the forecast at supply lead time – that is, the point after which you can no longer impact supply in the period being forecast.  For example,  if the supply in February cannot be adjusted after January 31, forecasting performance for February would be based on the forecast as of January 31.

A more contentious question is: Should you ever change your forecast within the supply lead time? Or going back to our example: Does it make sense to change the February forecast in February, even though you can no longer impact February’s supply?

Elif Kotman and others on the blog point out a benefit of changing the forecast within supply lead time: “Even though the Supply Chain may not change the production or purchases for the current month anymore, they can adjust the planned volumes/quantities for periods in the further future.” This is reasonable as long as you have a high degree of certainty in the change, and that the change is significant.  Small changes are inconsequential so why waste time on them?  Frequent changes terrorize and add nervousness to the planning systems, as Scott Roy and Tommy Jorgensen pointed out in the discussion.

Another situation is when you can make changes to supply within the forecasting bucket.

Many (perhaps most) organizations plan supply in weekly buckets, even though they do sales forecasts in months. Richard Watson makes a strong case for weekly forecasting, “…because it enables 52 data points in the year creating a clearer definition of the demand pattern, allowing the organization to be more dynamic, while at the same time simplifying tracking and monitoring mechanisms.” Aligning forecasting and planning buckets also avoids the messy conversion between months and weeks.

Join IBF’s discussion group on LinkedIn, and make these conversations a regular part of your working week.  And if that is not enough, join us in Scottsdale, AZ (February 26-28) for the IBF Supply Chain Forecasting & Planning Conference which includes:

• Monday morning ½ day workshop on “What Management Must Know About Forecasting.”
• Round Robin Roundtable Discussions on various topics including Worst Practices in Forecasting.
• Schedule a 30-minute consultation with me or one of my SAS colleagues from professional services and R&D. We’ll be ready to discuss your biggest challenges related to forecasting process, statistical modeling, or whatever you have to throw at us. Send me an email (mike.gilliland@sas.com) to reserve a time, or sign up at the SAS booth at the event.
• Free copy of The Business Forecasting Deal (book signing during breakfast on Tuesday).

Register by January 27 and enjoy early bird pricing and free participation in the IBF Golf Outing. (Based on past scores from the outing, actually being able to golf is not a requirement.)

 Hear Mike Speak at: 

Mike Kelleher - Hollister

Motivational speaker Lou Tice called it a “Scotoma”—an area of partial alteration to one’s field of vision.  Allstate Insurance represents something similar in one of it’s television commercials featuring a man by the name of “Mayhem”.  In this particular ad we see Mayhem clinging to the side of an unsuspecting woman’s SUV claiming to be her blind spot. Acting as the woman’s blind spot in her car he tells her its all clear to change lanes however, when she proceeds to change lanes she crashes into another oncoming truck.  How can this so called “blind spot” affect a company’s demand planning & forecasting process or even the bottom line?  If this blind spot impacts management, could it impact the entire team?

The answer is yes it can.  I had been working in the forecasting and demand planning fieldfor 17 years when I discovered that I was the blind spot, the Scotoma, in the process.  I came to understand that I had allowed my wealth of experience to overshadow the needs of the company.

In the session I will be giving at IBF’s Supply Chain Forecasting & Planning Conference in Scottsdale, AZ you can hear not only some of the warning signs of a potential blind spot but also how to re-energize ideation in yourself and others in order to eliminate the blind spot or neutralize its effects.  I will also provide five important qualities that reporting should contain, and I will touch upon the qualities of a great forecaster as well.

We are fortunate to enjoy the world of forecasting.  Forecasting mixes the discipline of science with the beauty of art.  I hope you will join me in generating ideas and lighting a new path to success.

Michael Kelleher
Chief Forecaster – North America
Hollister

Hear Michael Speak at IBF’s 

Mike Gilliland AKA: The BFD

Forecasting performance objectives are usually set in one of three ways:

• Relative to “best-in-class” industry benchmarks.
• Improvement over prior year performance.
• Arbitrarily – based on what management wants or needs to happen.

All three are wrong.

• There are many perils in relying on industry benchmarks to set your own organization’s performance objectives, the most important of which is relevance. The organization with best-in-class forecast accuracy probably achieves this because they have the easiest to forecast demand.

If your organization does not enjoy similarly favorable “forecastability” of its demand patterns, then there is little hope of achieving best-in-class performance.  Setting unreachable goals just demoralizes the forecasting staff, and encourages them to cheat.

• In general, improvement over prior performance is an appropriate objective. However, we must be wary of the context in which that improvement is measured.

If there are no substantive changes in the forecastability of demand patterns from year to year, then improvement in forecast accuracy (or at least, not doing worse!) is a reasonable objective.  However, what if forecastability changes?  This occurs when demand patterns change, either organically (without our intervention), or due to our own sales, marketing, and financial practices.

For example, switching a product from everyday low pricing (EDLP – where prices remain constant) to hi-lo pricing (where temporary price cuts create spikes in demand), would greatly increase demand volatility, and reduce forecastability.  If a product were under EDLP in 2011 and hi-lo pricing in 2012, we would actually expect reduced forecast accuracy in 2012.  Insisting on improved accuracy after such a change would be unreasonable.

• Forecasting performance objectives must be based on what is reasonable to expect, given the nature of demand patterns.  Simply pulling a number out of the air, such as “MAPE for all products must be <20%” is inappropriate and irresponsible.

What if demand patterns are highly volatile, and 20% MAPE is not achievable – then you give the forecasters every reason to give up or find a way (by gaming the metrics) to achieve the goal.  Or, perhaps demand patterns are very easy to forecast and the goal can be reached by just using a naïve model? How hard are your forecasters going to work to improve accuracy if they can beat the goal by doing nothing?

My Gift: Your 2012 Forecasting Performance Objective

As pathetic as this may sound, perhaps the only reasonable objective for 2012 forecasting performance is to beat a naïve model (or at least do no worse), and continuously improve the process.

Improvement can be demonstrated by reducing the error and bias in the forecast, increasing the Forecast Value Added, and becoming more efficient at executing the forecasting process (spending fewer resources).

If you can achieve 20% MAPE by using automated statistical forecasting software – or by using an elaborate collaborative and consensus process occupying all of your sales reps, planners, customers, suppliers, and executive staff for several hours every month – which is the better way to go?

Why Management May Hate This Gift

So for your 2012 performance objective, what MAPE (or whatever other particular metric you use) must you achieve?  Sorry, I cannot tell you.  (That is the part that management hates.) Your goal is to do no worse than a naïve model in 2012, and we won’t know how well a naïve model does until the end of 2012.

You must first choose an appropriate naïve model (e.g., random walk, seasonal random walk, etc.).  Then you must track your organization’s forecasting performance each period and compare that to what your naïve model achieved.  Whichever does better in any particular week or month doesn’t matter – short term results can be due to chance.  But by the end of the year, you should be able to draw one of three conclusions:

1. We forecast worse than a naïve model.
2. We forecast about the same as a naïve model.
3. We forecast better than a naïve model.

Conclusion 2 means that your process is in a statistical dead heat with the naïve model – you cannot reject the null hypothesis that there is no difference between the two approaches.  If you are committing a lot of resources to forecasting, you may want to redirect those resources to more productive activities.

If you achieve 3, congratulations, your forecasting process is doing its job.  Take pride – as this can be surprisingly more difficult than it appears it should be.

If you achieve 1, then welcome to the unfortunate reality of business forecasting – where organizations are often best at making a tough problem worse.

Happy holidays…

Bio: Michael Gilliland is Product Marketing Manager at SAS, and author of The Business Forecasting Deal.  Mike is a frequent contributor to the Journal of Business Forecasting, and (along with Ryan Rickard of Newell Rubbermaid) will be delivering a half-day workshop “What Management Must Know About Forecasting” at the IBF Supply Chain Forecasting Conference in Scottsdale, AZ, February 26-28, 2012.  Conference attendees will receive a free signed copy of his book.  You can follow Mike’s blog, The Business Forecasting Deal, at blogs.sas.com/content/forecasting.  Furthermore, Mike will be contributing on a monthly basis for IBF’s demand-planning.com blog.  Please submit your topic ideas to the IBF here: info(at)ibf.org

Hear Mike Speak at IBF’s: 

John Brown - Coca Cola

How often have you heard these words during a meeting in your office? “Say what?  Forecast for an unplanned event?  Isn’t that like buying flood insurance in Phoenix?

Regardless of whether or not we choose to plan for them, catastrophes happen. However planning ahead can mean the difference between success and failure when these situations arise.  Let’s look at the recent earthquake in Japan.  Should we forecast for earthquakes?  In Japan earthquakes are a daily occurrence so the answer should be yes.  Is it necessary to forecast for a 9.0 earthquake?  Maybe not, but it happened.  Follow the earthquake with a tsunami? This is definitely a possibility seeing how Japan has so many coastal regions.  Now we need to forecast a third contingent event, i.e. the damage to the Fukushima nuclear reactors and then identify and plan for the global impacts, especially in the electronics and automotive industries? OK, now this is getting ridiculous.

All of the above events happened and they will happen again. The event will probably not be an earthquake and most likely will not happen in Japan. But somewhere, sometime, you can be sure that we will experience another significant disruption to our supply chains.  Take for example, what just happened at the Shell oil refinery on the island of Pulau Bukom near Singapore. This is the company’s largest refinery, which just experienced a major fire and as a result has to be shut down as of 03-Oct.  What will the impact be?  Only time will tell.

So what message is here?  Simply put:  We must know and understand our value chains.  Where the dependencies and what are are the weak points.  What would we do if we lost manufacturing at site “X”, lost supply from supplier “Y”, or were suddenly unable to use shipping route “Z.”?  What if a pandemic broke out in the country where we have our greatest revenue base?  Each company and each value chain has unique characteristics.

We cannot afford to think only in terms of getting products made and delivered either.  We must think about the effects that risk events will have on the demand for our products.  As many have seen, when the economy tanks (also considered to be a risk event), the demand for durable goods declines and  purchasing discretionary items becomes delayed because consumers hunker down for the economic winter, and hope it doesn’t last too long.

I look forward to sharing my experience as the keynote speaker and meeting all of you at the upcoming Supply Chain Planning and Forecasting: Best Practices Conference in San Francisco. As far as Risk Management is concerned, don’t expect a simple answer because unfortunately there isn’t one.  You will, however, learn how to build a framework that can make you more prepared for the unknown – and plan for it.

John J. Brown, PE
Director, Risk Management, Supply Chain Development
The Coca-Cola Company

Hear John’s Keynote Presentation at:

John Gallucci - Nice-Pak, Inc.

“So, even a well thought-out forecasting process can be wasteful if it is not done properly.” This was a remark made by one of the attendees who came to hear my “Lean Forecasting & Planning” presentation at IBF’s recent Business Forecasting & Planning Academy @ 2 Levels.  This declaration was also one of the more noteworthy “a-ha!” moments of the workshop.  I designed the session so that it focused on the application of lean principles in the forecasting process.  We defined any activity that did not create value for the consumer as wasteful, and then targeted those activities for elimination.  Attendees also received some tools to assess where waste exists in their companies, and were able to provide an unending list of examples in their current processes such as…

… the duplicate activities that take place because of a  lack of trust and poor communication across functions built on a silo mentality

… the painful manual processes that could be automated if capital funds ever become available

… the forecaster who spends most of her time on “C” and “D” items

… the egomaniac running Sales who pushes the Consensus Team to change their projection so he can meet his own objectives

….Etc. etc.

This IBF workshop also reviewed the opportunity cost of waste in Forecasting. Opportunity cost reduces an organization’s clock speed, reduces margins, and drives a less productive culture.  It also focuses key resources on meaningless internal positioning tactics, while the competition is working towards creating the next big idea!  One attendee at the workshop provided an example where her cross-functional team spent over 100 hours per month building a forecast that was never applied to their advanced planning system.  What a waste!

The application of lean principles is relatively new to Forecasting, even though it is something we have been doing  for years without recognizing it.  The elimination of bias, for example, is driven by a zero-waste lean mentality.  Pull-based market-driven S&OP is also emerging as a trend for leading Planning organizations.  These activities show clear progress, but they only address part of the opportunity.

We must take a more holistic view when targeting the elimination of waste in the Forecasting process.  It exists in our processes, policies, and systems.  It is an unwieldy enemy that transcends functions and requires change management practices.  Eliminating waste from Forecasting  requires continuous improvement techniques that by definition never reach an end-state.  The task is difficult, but then again, the most fulfilling ones often are.

A brief role-playing scenario in the IBF workshop provided clear proof that lean forecasting is a competitive advantage.  My journey has begun.  Has yours?  Where does waste exist in your forecasting organization?  Are you up for the challenge?

John Gallucci
Sr. Director of Supply Chain
Nice-Pak, Inc.

Hear John Speak at

Rohit Parangath - EMD Millipore

After attending the APICS/IBF Best of the Best S&OP conference I came back with a sense of eagerness and ambition to implement what I had learned over the two days I had spent at the conference filled with information.

The sessions that I attended included presentations from Motorola, BASF, Rolls-Royce Energy, Rubbermaid, Timberland, & OfficeMax. Topics varied from Engineer-To-Order which was a session given by a representative from Rolls-Royce Energy, to BASF’s presentation on process environments to the presentation on retail environments from OfficeMax.

The conference was structured to offer Level 1 and Level 2 seminars, where Level 1 was geared towards companies that were in the process of implementing S&OP (or thinking about it) and Level 2 was aimed at companies that had a process already in place but wanted to improve. Most of the sessions that I attended were Level 2 as my company is exactly in that category.

I work in the S&OP department of a bio-science company in San Diego and have held different positions in S&OP throughout my tenure there. I have held positions ranging from Demand Coordinator, to Supply Coordinator to my current role as S&OP consultant. We have had an S&OP process in place for about 2 years now, but something about it didn’t feel right. It has always seemed more like a data extraction and graph building exercise than a decision making process. S&OP reviews were often seen as a burden due to the time that is needed to be invested every month to gather all of that data. For a division with close to 15,000 unique SKUs it can be quite a tedious exercise! The main point from all of the sessions that struck me was the passion that all of the presenters had for S&OP. All the presenters were so enthusiastic about sharing what they had learned and implemented that I actually felt that there was something lacking at my company.  I wondered why that was the case, since we had been doing S&OP for 2 years. Why weren’t we as passionate about the process as these companies were? We even had tremendous support and executive level leadership, which most companies lacked. It didn’t make sense.

While drinking a couple beers at the Hilton Chicago’s Kitty O’Sheas Irish pub after the first day’s sessions, it struck me… Data. I realized that we spend so much time downloading, massaging and formatting the data so that it is in a presentable form that we are left with precious little time to actually analyze the data to make valid decisions based on it. I knew I had suffered from this problem in both my Demand and Supply Coordinator roles.

The next day I spoke to some of the presenters and sure enough, almost all of them had either dedicated teams of Analysts or phenomenal IT support when it came to reporting on S&OP. They spent 20% of their time gathering the data and 80% analyzing the data. It was almost the opposite in my company. I realized my first step after getting back would be to work with our IT department in order to automate our reports as much as possible. For a short term solution I decided to work with the different departments to create standard templates for reports so they don’t have to be done from scratch each time. I felt it was essential to bring back the passion that I saw at the conference to my company and I knew that easing the S&OP workload would be the best way to do so.

While the companies that presented were from varied industries, the ideology remained the same. I thought bio-science was complicated until I heard about Rolls-Royce’s take on risk mitigation in S&OP, where each order was worth millions of dollars! I learned how OfficeMax invested a lot of time in working with their suppliers to get them involved in the S&OP process. I also loved Newell Rubbermaid’s concept of S&OP entities.

Some other tips and ideas that I took from the conference and  plan to implement are listed below

Simplify the Cs.
Let ERP control your Cs. Most of us have multi-million dollar ERP suites. The least it can do is manage your C materials with minimal input. Stop over analyzing C materials and try your best to automate all operational procurement and production processes. Use Safety stock, re-order point planning or min-max levels in order to plan for low sellers with minimal forecasts.

Extend
In order to be successful you need to extend S&OP beyond the organization. Identify key customers and suppliers to work with and then build and value your relationships with them.

Share
Usually only a few lower management level employees are involved in the S&OP process. Spread responsibilities around to get more employee involvement. S&OP is not an elite club, it becomes much more efficient when you build an S&OP knowledge base with key people across your different sites. Increase conversations about the S&OP process to bounce ideas off each other. Do not underestimate the value of visibility. Transparency is worth it’s weight in diamonds.

This was my first APICS/IBF conference and I honestly didn’t know what to expect. I definitely did not expect the lessons that I took home  to be as helpful as it was. I’ll be there next time as well!

Thanks!

Rohit Parangath, CPIM
S&OP and Integrated Planning Processes Consultant
EMD Millipore

Thank you IBF and APICS for organizing a very successful Best of the Best S&OP Conference.  Our company is in the early stages of formalizing our S&OP process.   The presenters shared many great ideas that we will be able to use as we begin our S&OP journey.  I would like to take this opportunity to share  just a taste of what I learned.

Demand consensus is needed in order to achieve success. One of the lessons that I took from the conference states that the whole organization needs to work from the consensus demand in order to be successful. I also learned that there is no room for success when you second guess the demand or apply a separate variation of it.

First and foremost, I learned that it is crucially important to have top management support in the S&OP process. In addition, the concept of range forecasting is another lesson that I brought back to my office and is something we can use with our suppliers at Broan-NuTone. While we know it is difficult to accurately predict 6 months out what our true requirements for the supplier will be, we can provide some range of demand to expect.   As the planning period moves closer, we can narrow the range.  By doing so, this will give our suppliers some tangible data they can use in their planning processes.

One very important question regarding how quickly we can communicate demand changes to our tier 1, tier 2, etc suppliers was a reality check for me. I know this varies from supplier to supplier in our organization, but in looking at our current processes, we see that the communication time can be days and weeks rather than hours or days. We will be employing some new software soon that I will seek to help address this area.

Extending the S&OP process to the suppliers is something I found to be very intriguing at the conference. While we do not yet have a formal executive S&OP process , it is my hope that once we reach this point  we will be able to explore the process of supplier S&OP. I can see how it can provide real value and drive efficiencies within the supply chain.

While we are just in the infancy stages of S&OP at our company, the tips and tools I learned from this conference will be very valuable as we begin to develop our S&OP process.  I know to start with something that we can have early success on and build from there. We see the value in using an S&OP process, we now just need to start.

Matt Treder
Sr. Acquired Products Planner
Broan-NuTone LLC

Edward Rodriguez - E-Z UP

We are a medium sized privately held business that has a large ERP, but probably hasn’t invested into its processes and user reporting as much as we should.  In my 6 years with the company, I started as the Controller, and then moved to Director of our retail stores/internet operation, and now I fill a void within Supply Chain.   My emphasis has been with procurement, negotiation, and sourcing, however considering that my background is mainly in Finance, I was not as well versed as I should be in the more detailed aspects Supply Chain and the S&OP process.   I found an advertisement for the IBF & APICS Best of the Best Conference while conducting internet searches related to bringing more value to the supply chain and purchasing process.   Upon first glance it seemed too narrow for my goals, upon closer review it looked like a good opportunity to learn about the overall process of inventory supply/demand, and a good way to bring some badly needed efficiency and harmony to what felt like a less-than-optimal process. I promised my boss a favorable ROI for the trip and off I went to Chicago.

My day started with a review of survey results and challenges.    One revelation that I found interesting was how Sales (Supply) driven the S&OP process is.   As a person looking at this from the Ops side, it was scary to think about bringing our Sales group, whose direction is to “just sell,” into such a complex process. Also, I had never thought of an S&OP “implementation” as much as taking these learning’s and applying them as it seemed right. This was clearly incorrect, as the Best of the Best Conference presented the S&OP process as a multifaceted, challenging change on how to do business. It became obvious that the way our company manages this process is outdated from somewhere in the past decade, so the call-outs from this discussion became very valuable. This included understanding the challenges (strategic coordination, executive buy in, technology, etc.) and recommended steps for a successful implementation. This was going to take a lot of learning to take back to the team at home.  So I became especially devoted to assure that I absorbed all the knowledge I could.  Plus, I networked so I could bounce thoughts and ideas from others in similar (or advanced) circumstances.

As a newbie in this field, it made the most sense for me to go through the level 1 discussions. The track started with a presentation titled, “Resolving Conflict & Building Consensus in the Monthly S&OP Process” by Alan Milliken.   He was a very no-nonsense speaker and delivered many important lessons such as:

• The executive team has to provide the goal and define the way
• Collaboration and consensus decision making are keys to success
• Goal is to resolve problems, not avoid problems
• Never give up trying to prioritize to reach goals, as management bias plays in, and you can’t lose sight of the big picture.
• Watch for “spectators” who have a detailed agenda – take them to the woodshed

Mr. Milliken’s presentation outlined a demand-supply planning model, and documented linkages between the two that will be very applicable during our roll-out.  In addition, he provided some very good ideas regarding agenda development and prioritization for the Executive S&OP.

Next was the presentation called “How to Effectively Utilize Forecasting and Demand Planning in the S&OP Process, by Mr. Bill Oakley of TE Connectivity. Mr. Oakley laid the foundation of his presentation by posing the key question: “How do we evolve?”   This was key for me, as our processes are somewhere in the stone-age, and that’s not acceptable.   Some key lessons from his presentation included:

• S&OP processes need to be concurrent to assure timeliness
• Don’t ambush people with the process – describe, explain, get them excited!
• Every move must have a benefit.
• Metrics must be fully understood
• People, Process, and Technology must all work together to facilitate a functional and well run Demand Consensus

Again, in retrospect some of this is obvious, however while dealing in the day-to-day, these things are easy to overlook.   Next was a lunch presentation by Sheetal Shah of Motorola, where he addressed key points regarding the incorporation of customers and vendors into the S&OP process.   His comments were well noted and will certainly be included in a phase of our S&OP roll-out.

The next presentation of information was by my favorite presenter of the conference, Mr. Craig Faulkner of W.L. Gore.   He is a person who isn’t faking the love of the S&OP process, and who I hope to emulate during our roll-out.     I actually attended two of his presentations:  “Supply Planning for Both In-House and Outsource Manufacturing” on Thursday, and “How S&OP Can Support and Enhance New Product Launches” on Friday.    I absorbed many applicable lessons from this presentation, including:

• Inventory exists to account for uncertainty, otherwise we wouldn’t need it.  The inventory dilemma is how to balance it – not that it’s just “bad” or “good”
• An effective S&OP process is a decision making process.  Communicate and execute one plan.
• S&OP should be dynamic, move with market needs, applies realistic goals, and is flexible to respond to market opportunities.
• There are many evolving benefits of S&OP, including better customer service, reduced obsolescence, enhanced teamwork, and better decisions.

The last presentation on Thursday was “Lean Forecasting” by Mr. Mike Gilliland of the SAS Institute, and Mark Hahn from Amway. Admittedly this is an area that I was least comfortable with, however I felt it was important to get exposed to some of these demand-side concepts that I could hopefully articulate to our Sales group properly.   These gentlemen were sharp and straightforward, and the following lessons stuck with me:

• The primary forecast objective is to forecast as accurately, efficiently,  and unbiased as possible
• Perfect forecasting is not realistic
• Focus on forecast efficiency
• Use FVA analysis to identify and mercilessly eliminate non‐value adding activities; streamline the forecasting process & re‐direct wasted effort
• FVA is measured by comparing the results of a process activity to the results you would have achieved without doing the activity

FVA was certainly a new concept, and I feel well armed to have an intelligent discussion with our Sales team about forecast methods and the benefits of applying statistical elements.

The following morning started with a session titled “Successful Implementation and Revitalization of S&OP,” presented by Mr. Bradley McCollum of Jarden Leisure and Entertainment. Mr. McCollum really went into the details of S&OP, talking through responsibilities of the demand and supply sides in a really understandable manner.   Takeaways that I could appreciate included:

• An S&OP Champion profile should include being well respected and dedicated to the process
• Forecasts need to be challenged – contradictions need to be addressed.   But disagree without being disagreeable.
• Successful S&OP implementations start with executive commitment and ownership
• Build the right team. You want the “A” Team
• Take the time to have an effective kick-off; educate and plan
• Pro-actively communicate and manage risks; off the bat, agree to what you know and what you don’t know

Mr. McCollum’s presentation will certainly be an important part of the road map to developing our process.    Not only did he present the details of demand and supply, but he documented how to make it all work together.

Unfortunately I had to leave before Mr. Todd Gallant’s “Pre and Executive S&OP Session” presentation. However, his presentation had very good, points that leant well to the entire family of sessions, and he has been very kind in answering my follow up questions via email.

All in all, my participation in this event has opened my eyes to many great opportunities for my company, as well as for my professional development.   Unfortunately, this also really highlighted our shortcomings, where I didn’t think we were so bad. However, I am now inspired to move my company forward procedurally and technically so that our processes can reach world-class status and our profitability is maximized.   Admittedly there was some overlap between the presentations; however for my purposes this really drove some key S&OP principles home. You will find me at the crossroads where demand and supply meet.    Thanks IBF and APICS!

Edward Rodriguez
Director, Supply Chain Management
International E-Z UP

A. Jain - IBF

Taking a 7 hour flight from New York to Heathrow, and then dragging yourself down to Central London can be a brutal commute.  But, on this day, there were no strenuous travel plans that were going to distract me from my excitement for IBF’s first London Forecasting Meet-up, hosted by Accenture.  And I am pleased to say, it was a great success.  We had Attendees from companies such as Nokia, Dell, AstraZeneca, McCormick, Rolls-Royce, Argos, Vodafone, and more. I was thrilled to hear how McCormick built a successful demand planning team and process.  I was also very happy to hear how other well known global companies, both up and downstream, improve their operations through better forecasting and planning.

The goal of the IBF meet-up was to provide a networking opportunity for professionals that recognize the importance of forecasting & planning. This event was geared towards professionals who are eager to learn, but lack the professional development budget needed for IBF conferences regionally and abroad.  While the Forecasting Meet-up may not have included the 2-days of rich and structured knowledge that an IBF 2-day conference offers, it still provided an environment to share lessons learned, best practices, and to build a professional network with little or no investment.

The event kicked off with a short introduction from Erik Daren, Supply Chain Consultant at Accenture who welcomed everyone to their office on Fenchurch Street.  Actually, Erik was instrumental in making this event happen, which we at the IBF greatly appreciate.  Allow me to take a second to mention a few things about the offices since they were so kind as to offer them up for our Meet-up. Stepping though Accenture’s office made me feel as though I had actually jumped into a Delorean and arrived in the future. I doubt Accenture does factory tours, but, maybe you can sneak in as a pizza delivery person to check it out .

Our featured speaker, Rachael Stafford who is the Business Integration Manager at McCormick UK shared with us her journey towards building a strong demand planning and forecasting team.   Rachel mentioned that some key challenges at McCormick were dealing with the company’s silo mentality as well as getting their internal customers and those who supply forecasting information to collaborate to achieve consensus.  She went on to say that, when attempting to achieve a cultural change in this environment, the common question was, “What’s in it for me?” So, Rachel thought, “Why not lunch? Her treat!”  And that is what she did.  Rachael meticulously scheduled lunch meetings with key people throughout the company. These lunches allowed her to reiterate her point, which was that working together is better for both of us, as well as holistically for the company too.  This enabled her to develop strong relationships in pursuit of “one number of the truth” as we say. Of course, all forecasters are often pressured to take down or raise their forecasts at any given time.  But, having key relationships that are less combative allows Rachel and her team to manage the game play that others in the company may create in order to achieve an objective forecast.

When it came time for Q&A there were so many people interested in Rachel’s experience that it almost seemed as though she was being cross examined. One attendee laughingly pointed this out to me later in the evening.  However throughout the “inquisition,” she handled herself beautifully showing her toughness, which is a prerequisite for today’s successful forecasting & demand planning professional.  Rachel will be the first one to point out that we’re not just number crunchers, but strong well rounded professionals.

Finally, we opened up the room for a round table discussion and a key topic of conversation was “Forecasting ownership in terms of where the function should reside and why?” Many companies have forecasting as part of the Supply Chain.  This is an interesting fact since it continues to validate IBF’s benchmarking research on where the forecasting function is finding a home internally.  The guys from Dell seemed to truly appreciate this discussion as expressed to me during the evening. They plan to explore the pros and cons of ownership upon returning to their office and credit the discussion at the meet-up for thinking this way.  As one of the attendees said, “Forecasting needs to be aligned where the major operational decisions are being made.”  It appeared as though the group concurred with this point.  For me, this reaffirmed my prior notion that there are times when forecasting should not be a truly independent function or department.  This is because you risk losing a connection with the business and could lose an opportunity to develop those important relationships.

One thing that bothered me during the discussions was someone had said that we must get the most out of our demand planners before they jump off to another area of the company?  I do think this is contrary to what’s happening with successful companies today. At many companies, Demand Planning and Forecasting is not an intermediary discipline before heading to another area of the company.  Many companies are actually creating hierarchies for demand planning all the way up to the Vice President of Demand Planning. This evolution continues to happen.  Plus, the salary levels are rising at an exponential rate, which will surely keep good demand planning professionals right where they are. IBF’s benchmarking reports prove this.

I must say, even after 2 hours had past, we still could have kept discussing and debating.  Thank goodness for the Accenture people who were mindful of the schedule and let us know it was time to wrap things up.  They were not sending us home though, they were kind enough to reserve space for us at the local bar for drinks.  Good times.

The next London/ UK Meet-up will be in the Fall of 2011.  Watch the IBF calendars for details. We hope to see you there!

Melissa Takas - V&M Star

Tom Wallace and I are currently collaborating on a portion of his new book. According to Tom, the book is titled Sales & Operations Planning: Beyond the Basics and according to Tom, “will focus on innovative enhancements to the basic S&OP set of processes”. One such innovative enhancement that has been made by V&M STAR is the full integration of cash flow forecasting within the S&OP process.

At V&M STAR, Finance was involved with S&OP from day one and within six months, after the process was stable, we were able to begin integrating financial data. I believe that one of the best choices we made was involving Finance from the beginning so that they would be able to understand the S&OP process better, and begin to understand where the data would now come from.

Don’t worry though if you didn’t include Finance in your S&OP process in the beginning because it’s not too late! The important thing is that your finance department becomes accustomed to how the S&OP process works and what role they will be expected to play going forward.

At V&M STAR we have seen five major benefits from linking financial data to the S&OP process:

1) Better strategic planning for outages (plant shutdowns) and scheduled downtime. Forecasting this far into the future enables us to plan effectively and schedule efficiently planned outages for capital projects or maintenance repairs.

2) Better alignment with strategic goals. Because the operational and financial numbers are now linked we are better able to align with the strategic goals of the company.

3) A more sophisticated annual budgeting process. Since we are forecasting eighteen months into the future we already have a full year forecast in July when the budget process begins and the data is validated and locked in at the Executive S&OP meeting that month.

4) Better cash flow management. Building too much inventory can cause major issues with the company’s cash flow but by integrating financial data into S&OP the team was able to see the impact of the decision and adjust the inventory build to meet both demand and cash flow needs.

5) Increased credibility with Stakeholders and Stockholders. The monthly forecasts given to Corporate are based on information shared during the S&OP Executive Meeting. This gives an up-to-date picture of the current needs of the business. Another benefit is that Corporate now has a more accurate monthly forecast. This in turn increases the business’ credibility, which in my opinion is the most important benefit of all.

I very much look forward to being able to share insights on V&M STAR’s fully integrated financial data and how it has benefited us. More so I am exited to be able to gain new prospective from a large group of presenters at the APICS & IBF’s Best of the Best S&OP Conference in Chicago.

Your comments or challenges on your S&OP experience are welcome!

Melissa R. Takas
Operations Controlling Supervisor
V&M STAR

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