best practices in forecasting
DESCRIPTION
Demand Forecasting presentation - expressing the basics of how to approach it as a Product Marketing Manager, Product Manager, or Marketing Manager. Presented at ProductCamp 2011 in Toronto.TRANSCRIPT
www.productcamp.org/toronto
July 23, 2011 – Ted Rogers School of Management, Ryerson University
Best Practices in Demand Forecasting
CHARLES DIMOV
CDIMOV@HOTMAIL .COMOR F IND ME ON L INKEDIN
ProductCamp Toronto – July 23, 2011
Operate Efficiently & Effectively Companies must understand Supply & Demand constraints
Accurate Forecasts Prepare for resource needs Prepare for structural evolution Invest right amount of Capital at right time Win in Market!
Why?
ProductCamp Toronto – July 23, 2011
OverSupply: Depreciating resources Obsolescence Overstaffing Excess Inventory Affects Price Drives Promo addiction Erodes Product Value Erodes Brand Value
Wrong Forecast
COGS ↑ Cash Flow Tied ROA ↓ GM ↓ Contribution Margin ↓ Acid Test Score ↓ Viability of Company ↓
ProductCamp Toronto – July 23, 2011
UnderSupply: Product Shortages Lost Sales Price ↑ Brand Promise ↓ Bad PR Customer Confidence ↓ Months to recover in
Supply Chain
Wrong Forecast
Market Share ↓ Lost Revenue Opp. Earnings ↓ P/E (not optimal) Lost Market Position Competitor Wins
ProductCamp Toronto – July 23, 2011
To Avoid This Forecast…
Image by: Iam Wahid (16Jul2009)
ProductCamp Toronto – July 23, 2011
Historics
Analysis
Triangulate
EyeBall
Feedback
Forecast Approach
ProductCamp Toronto – July 23, 2011
Whenever possible – use HISTORICAL DATA
For NPI – use closest HISTORICAL DATA
“Study History or be doomed to repeat it” Brother Loman Lavigne
First Principle
Time variability, and scale
ProductCamp Toronto – July 23, 2011
Analysis: Seasonality
Trend
Cycle
Seasonality
1 Year
1 Economic Cycle
ProductCamp Toronto – July 23, 2011
Excel / Systat / SPSS / SAS / MiniTab Descriptive Statistics to show boundaries
Analysis: Statistics
A
B
NOTE: Watch the STD Deviations
ProductCamp Toronto – July 23, 2011
Many S/W Tools
Expert System chosen models
Lowest MAD (Mean Absolute Deviation)
Export to Excel
Can be a Dead Simple Process
Analysis: Forecast Tools
ProductCamp Toronto – July 23, 2011
Forecast Pro $1,295 - $8,995 US www.forecastpro.com
Vanguard www.vanguardsw.com
DemandWorks Smoothie $500 - $6,000 US www.demandworks.com
SAS www.sas.com
Analysis: Forecast Tools
ProductCamp Toronto – July 23, 2011
CrowdSourcing: “under the right circumstances, groups are remarkably intelligent, and are often smarter than the smartest people in them.” p.xi Introduction, Wisdom of Crowds, James Surowiecki.
Analysis: CrowdSourcing
???
ProductCamp Toronto – July 23, 2011
No one model will be accurate every time
Forecasting is inexact Dark-Art / Science
Provides General Guidance on direction and magnitude
Triangulate
-Seasonality Est.-Forecast Tool Est.
-CrowdSource-Channel Est.-Sales Funnel-Supply Constraint
X
ProductCamp Toronto – July 23, 2011
Product / Marketing Mgr Smarts / Heuristics
Eyeball
Major DM + Ad Campaign+ Promotional Offer
Version 2 Pre-Anounce will stall sales – B4 general availability
ProductCamp Toronto – July 23, 2011
Product / Marketing Mgrs Pricing Model changes Promotional Offers Marketing Campaigns Discounting changes Brand effects Bankruptcies / New entrants Competitive Analysis Market Conditions Major Events Reduced Defects
Eyeball
New Channel Partners Distribution Model Disruptive Technology Chg Market Preference shift Manufacturing capacity Market Share expectations Global Events Economic Cycle effects Inventory Returns Other Factors
ProductCamp Toronto – July 23, 2011
Every Quarter – check Forecasts vs Actuals
Focus = biggest deviation
Tweak Model
Do it again!
Feedback Loop
ProductCamp Toronto – July 23, 2011
Summary
Historics
Analysis
Triangulate
EyeBall
Feedback
Image by: CobraSoft
ProductCamp Toronto – July 23, 2011
Books: Not found a practical book
Websites: www.ibf.org(not s/w specific)(discussion forum)
Article: TPMA Focus 3Q11
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