Navigating a Course with Planning and Forecasting

This is an excerpt of the original article. It was written for the May-June 2014 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2014

Getting the most from Sales and Operations Planning is a combination of people, processes, and technology. The Red Wing Shoe Company details the steps it took to improve S&OP processes, slash its S&OP planning efforts by 50 percent, and align manufacturing with sales—all while growing its business.

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Over the years I have followed a variety of supply chain surveys. A question usually asked is: “What needs to be most improved?” Invariably demand forecasting is always among the top areas mentioned. This answer is wishful thinking on the part of respondents, as there will always be significant demand forecasting errors, as long as customers remain fickle, demand-side managers competitively shape demand, and businesses constantly pursue new business opportunities. Planners should recognize and deal with demand uncertainties using risk management techniques instead of griping about inaccurate forecasts. Indeed, poor financial performance might be the result of poor planning that does not consider uncertainties.

I surmise leaders and planners have always complained of bad forecasts being given to them to plan operations. In the spirit of the Carl Reiner and Mel Brooks comedy skit, “The 2000 Year Old Man,” I could imagine the response of Julius Caesar 2,000 years ago when asked by the media of the time how he could have improved upon his successful military conquests. “Julie” would have said something like this:

“We could have been more successful if our forecasting of the enemy’s manpower and resources were better. We could have conquered more peoples in a shorter amount of time, and with much fewer casualties. Of course, my good generals were smart enough to figure that the forecasting was not perfect, and they would take extra supplies of warriors and armaments to war, just to be safe. Meanwhile, my bad generals took the information provided at face value, and skimped on taking manpower and armaments. They experienced more losses and casualties despite taking fewer resources with them than the good generals. Bad generals constantly thought they could get away with blaming their losses on faulty forecasts. I do not accept those excuses knowing that the information provided was the best we could estimate. I constantly replace bad generals, sending them back home to struggle and lead the simple farming and fishing lives they deserve.”

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