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Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
Kinaxis - Is Forecasting Fatally Flawed?
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Kinaxis - Is Forecasting Fatally Flawed?

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Here's a presentation from Trevor Miles, director of thought leadership, Kinaxis called "Is Forecasting Fatally Flawed?" …

Here's a presentation from Trevor Miles, director of thought leadership, Kinaxis called "Is Forecasting Fatally Flawed?"

Want to see the webcast version of this presentation? Visit: http://www.kinaxis.com/campaign/on-demand-ResponsivenessDemandForecasting/

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  • 1. Copyright © 2011 Kinaxis Inc. All Rights Reserved. 1
  • 2. Is Forecasting Fatally Flawed? Responsiveness – The Other Half of the Demand Forecasting Conversation Trevor Miles director, thought leadership e: tmiles@kinaxis.com | m: +1.647.248.6269 | t: @milesahead Copyright © 2011 Kinaxis Inc. All Rights Reserved. 2Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 3. Agenda• Business Drivers• Why Continuous?• Why Collaborative?• People, Process, Technology• Continuous and Collaborative S&OP Copyright © 2011 Kinaxis Inc. All Rights Reserved. 3
  • 4. Business Drivers Copyright © 2011 Kinaxis Inc. All Rights Reserved. 4Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 5. Today’s multi-tier global supply chain Pervasive, global outsourcing Product portfolio proliferation Shrinking product lifecycles Increasing demand volatilityCopyright © 2011 Kinaxis Inc. All Rights Reserved. 5
  • 6. Market dynamics• Top CPG companies forecast performance – Terra – MAPE for a one month lag was 31% + 12% • Forecast Error Range: 19% - 43% – Eight years ago: 36% + 10% MAPE• High-Tech/Electronics – anecdotal – Struggle to get better than 50% MAPE• Where will breakthrough performance come from? – Learning to forecast and plan better? – Learning to respond profitably to plan variance? Copyright © 2011 Kinaxis Inc. All Rights Reserved. 6
  • 7. Companies can’t predict thefuture,…build organizations that willsurvive and flourish under…any possible future.Source: McKinsey Quarterly, Dynamic management: Better decisions in uncertain times, December 2009 Copyright © 2011 Kinaxis Inc. All Rights Reserved. 7
  • 8. A volatile economy makestraditional budgetsobsolete before they’re evencompleted. New approaches: 1. Scenario planning with trigger events 2. Zero-based budgeting 3. Rolling forecasts 4. Quarterly budgetingSource: McKinsey Quarterly, Just-in-time budgeting for a volatile economy, Spring 2009 Copyright © 2011 Kinaxis Inc. All Rights Reserved. 8
  • 9. Markets not affected equallyCopyright © 2011 Kinaxis Inc. All Rights Reserved. 9
  • 10. Markets not affected equallyCopyright © 2011 Kinaxis Inc. All Rights Reserved. 10
  • 11. Markets not affected equally No matter how accurate the forecast, demand volatility will remain.Copyright © 2011 Kinaxis Inc. All Rights Reserved. 11
  • 12. Standard demand segmentation 80% of Volume 80% of Variability• Each point is a specific SKU• Coefficient of variation = Std.Dev./Mean Copyright © 2011 Kinaxis Inc. All Rights Reserved. 12
  • 13. Standard demand segmentation Make-to-Stock Configure-to-Order Pull Make-to-Order Rationalize?• Each point is a specific SKU• Coefficient of variation = Std.Dev./Mean Copyright © 2011 Kinaxis Inc. All Rights Reserved. 13
  • 14. Standard demand segmentation Make-to-Stock Configure-to-Order Pull Make-to-Order Rationalize?• Each point is a specific SKU• Coefficient of variation = Std.Dev./Mean Copyright © 2011 Kinaxis Inc. All Rights Reserved. 14
  • 15. Demand segmentation Demand forecast (units) Hi scenario 400 Uncommitted 300 Flexible quantity 200 Base scenario contract 100 Fixed quantity Lo Scenario contract 0 Time Venu Nagali , Procurement Risk Management (PRM) at Hewlett-Packard Company, Stanford Risk Management Roundtable, November 13, 2006Copyright © 2011 Kinaxis Inc. All Rights Reserved. 15
  • 16. Supply chain segmentation400 Hi Hi300 Hi Base200 Base Lo100 Lo Base Lo 0 Time Time Time • Where will breakthrough performance come from? – Learning to forecast and plan better? – Learning to respond profitably to plan variance? Copyright © 2011 Kinaxis Inc. All Rights Reserved. 16
  • 17. Why Collaborative? Copyright © 2011 Kinaxis Inc. All Rights Reserved. 17Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 18. Why collaboration?Copyright © 2011 Kinaxis Inc. All Rights Reserved. 18
  • 19. The ‘Bullwhip Effect’ at work Christoph Glatzel, Stefan Helmcke, and Joshua Wine, Building a flexible supply chain for uncertain times, McKinsey Quarterly, March 2009Copyright © 2011 Kinaxis Inc. All Rights Reserved. 19
  • 20. The ‘Bullwhip Effect’ at work J Forresters Industrial Dynamics (1961) Central message: • Multi-Tier Visibility • Collaboration Christoph Glatzel, Stefan Helmcke, and Joshua Wine, Building a flexible supply chain for uncertain times, McKinsey Quarterly, March 2009Copyright © 2011 Kinaxis Inc. All Rights Reserved. 20
  • 21. S&OP – balancing competing goals Goal: Make the financial budget. Top-down focus. Wants: Control and predictability of operations Forecast: The budget/annual operating plan FinanceGoal: Maximize Goal: Minimize supplyrevenue and market chain costs, often Demandshare Side inventory Sales and OperationsWants: Guaranteed Marketing Supply Wants: Minimumproduct availability Side demand uncertaintyForecast: Sales plan Forecast: Supply plan Supply Chain Goal: A feasible plan. Bottom-up focus Wants: Minimize risk and disruption Forecast: The demand plan Copyright © 2011 Kinaxis Inc. All Rights Reserved. 21
  • 22. S&OP – balancing competing goals Goal: Make the financial budget. Top-down focus. Wants: Control and predictability of operations Forecast: The budget/annual operating plan FinanceGoal: Maximize Goal: Minimize supplyrevenue and market chain costs, often Demandshare Side inventory Sales and OperationsWants: Guaranteed Marketing Supply Wants: Minimumproduct availability Side demand uncertaintyForecast: Sales plan Forecast: Supply plan Supply Chain Goal: A feasible plan. Bottom-up focus Wants: Minimize risk and disruption Forecast: The demand plan Copyright © 2011 Kinaxis Inc. All Rights Reserved. 22 22
  • 23. Why Continuous? Copyright © 2011 Kinaxis Inc. All Rights Reserved. 23Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 24. S&OP in the overall planning process Business Tactical Strategy Planning S&OP Planning ExecutionDegrees of Freedom Financial Capacity Sourcing Scenario Planning Inventory Product Demand Copyright © 2011 Kinaxis Inc. All Rights Reserved. 24
  • 25. Integrated business planning the goal Integrated Business Planning Business Tactical Strategy Planning S&OP Planning Execution Scenario PlanningDegrees of Freedom Finance Capacity Sourcing Inventory Product Demand Copyright © 2011 Kinaxis Inc. All Rights Reserved. 25
  • 26. Traditional planning process segmentationCopyright © 2011 Kinaxis Inc. All Rights Reserved. 26
  • 27. Traditional planning process segmentationCopyright © 2011 Kinaxis Inc. All Rights Reserved. 27
  • 28. Traditional planning process segmentationCopyright © 2011 Kinaxis Inc. All Rights Reserved. 28
  • 29. Continuous and collaborative S&OPCopyright © 2011 Kinaxis Inc. All Rights Reserved. 29
  • 30. Continuous and collaborative S&OPCopyright © 2011 Kinaxis Inc. All Rights Reserved. 30
  • 31. Process, People, Technology Copyright © 2011 Kinaxis Inc. All Rights Reserved. 31Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 32. Gartner: Most companies stuck at stage 1 or 2 Larry Lapide – Demand Management Solutions Group – 2008 Copyright © 2011 Kinaxis Inc. All Rights Reserved. 32
  • 33. Relative importance of technology Larry Lapide – Demand Management Solutions Group – 2008 Copyright © 2011 Kinaxis Inc. All Rights Reserved. 33
  • 34. ProcessPeopleTechnology Copyright © 2011 Kinaxis Inc. All Rights Reserved. 34
  • 35. ProcessPeopleTechnology Copyright © 2011 Kinaxis Inc. All Rights Reserved. 35
  • 36. …[technology] … the web will changenothing until we use itfor that purpose …Source: http://www.euansemple.com/theobvious/2011/1/20/does-the-web-change-everything.html Copyright © 2011 Kinaxis Inc. All Rights Reserved. 36
  • 37. Copyright © 2011 Kinaxis Inc. All Rights Reserved. 37
  • 38. Copyright © 2011 Kinaxis Inc. All Rights Reserved. 38
  • 39. • Technology choice means – Different skills/people – Different processes – Different results Copyright © 2011 Kinaxis Inc. All Rights Reserved. 39
  • 40. Continuous and Collaborative S&OP Copyright © 2011 Kinaxis Inc. All Rights Reserved. 40Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 41. “If I had asked people what they wanted, they would have said faster horses.” - Henry FordCopyright © 2011 Kinaxis Inc. All Rights Reserved. 41
  • 42. Continuous and collaborative S&OP AND, not OR Collaborative, not linear Event-driven, not calendar-driven Effective, and efficientCopyright © 2011 Kinaxis Inc. All Rights Reserved. 42
  • 43. Copyright © 2011 Kinaxis Inc. All Rights Reserved. 43
  • 44. Thank you! Questions? Trevor Miles | e: tmiles@kinaxis.com | m: +1.647.248.6269 | t: @milesahead Copyright © 2011 Kinaxis Inc. All Rights Reserved. 44Copyright © 2011 Kinaxis Inc. All Rights Reserved.
  • 45. Watch my recorded presentation from the High-Tech Forecasting & Planning Summit here: http://www.kinaxis.com/campaign/on-demand- ResponsivenessDemandForecasting/Copyright © 2011 Kinaxis Inc. All Rights Reserved. 45

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