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Forecasting Problems
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Customers

Are new or lost accounts a possibility in the forecast or did they have an impact on the historical data? Are their buying habits likely to change due to evolutions from a traditional to JIT manufacturer, or stocking level policy changes? Will any upcoming or past promotional activity be a factor? Have there been or will there be any changes in personnel that dealt with your company that could cause an aberration? Are they being sold to another owner that could either expand or shut down existing operations?

The sales department is your key to success in understanding the customer issues. You will not get a good forecast just by sitting in your office and letting the computer model run! However, in many organi­zations, a climate of mistrust exists between sales (those who have the information) and operations (those who need the information). If there isn't a formal sales and operations planning process in your company, it is up to you to earn the trust—and that is what you MUST do. You must understand that these folks were probably not hired because they are good at forecasting. In fact, many are bored or put off by it. They were hired because they are good at selling product. You must never betray trust by revealing confidential information given to you to help the forecasting. If programs are planned and the competition finds out, profits are at stake. Treat the sales department as the eyes and ears of a company where customers are concerned.

Product

Why would your customers continue to want your product, or more or less of it? Where is the product in its life cycle? Is your product sea­sonal to the extent that a harsh winter would be a blessing and a mild one would be a curse? Is it seasonal to specific times of the year, as are lawn-care products, back-to-school products, or holiday-related prod­ucts? Are there design or catalog changes that would cause the product to have greater appeal and application?

Engineering and marketing can be a great help. You must consider if catalog or design changes will cause a change in demand, such as an oil filter that had fit 5 years' worth of cars now being found to fit 10 years' worth. You must know how the product fits in consumer popu­larity and technology—is it the CD or 8-track player of the industry? You must know where you are in the product life cycle. For instance, if it is a car part that fits the latest model on the showroom floor, you may not sell many at first, because the cars will still be under warranty. But give that same car several years (or a couple of months as a rental car) and the parts will become worn and need replacement after the war­ranty is long gone.

Competitors

What DO they have up their sleeves? Are they stepping up efforts to grow market share at your expense, or are they focusing on other, non-competitive lines? Are they planning major marketing initiatives, pro­grams, or advertising? Have they had product failures or recalls? What's up with their pricing? Are they changing service directions? Are they being bought or sold, or buying other business, all of which can affect their business strategies?

Sales and marketing folks are your best opportunity to know what's going on out in the street and for insight into what the impact might be. Sometimes trade journals or even the nightly news can be sources of information. Some products, such as consumer commodities, are ex­tremely price-sensitive. A competitor's decision to be the low-price leader can cause a defensive position in your company to either drop prices or compete in another way, such as service or quality. Consider the success in the pharmacy business of chains that are implementing phone-ahead or drive-thru prescription services to cater to today's service and conve­nience demands. What your competition does may have just as great an impact to your business as what your own business does.

Your Business Plans

Is your company seeking to grow through acquisition to buy market share? Is your company planning to increase or cut back on promo­tional activities, coupon offers, or buy-one-get-one-free specials? Are you planning a price increase that will be communicated in advance and probably cause a flurry of orders at the old price (and a steep drop immediately after)? Has there been a change at the top and the new executives are putting the brakes to old programs?

Company communiqués and announcements may be of help, but may also come too late. Sales and marketing types are your best bets for plans on upcoming or planned promotions. You must be careful in reacting to planned events that are not yet firm. There can be enormous opportunity in getting the plans in the forecast far in advance to mini­mize corrective action later, but there can also be great risk if the plan falls through. The trust factor is invaluable.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 10


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