Thinking About Tomorrow

Forecasting has never been more important — or harder. Customers are less loyal, and global competition more fierce, making it difficult to predict where sales are going. Adding to the problem: Products, sales and distribution channels all have proliferated, and the life spans of products have gotten shorter.

As a result, some companies are being forced to adopt new ways to improve forecasting and planning. And a common theme links them all: collaboration.

More specifically, these companies are requiring different departments — chiefly sales, production and marketing — to share more information and work together on setting sales and production goals. They are regularly reviewing how close forecasts come to actual results, and making adjustments in production and marketing as needed. They also are increasingly using full-time demand and supply planners who prepare forecasts and related recommendations about demand and production.

Cutting-edge companies take collaboration further, integrating operations with vendors and suppliers in ways that give each party access to data that helps keep the supply chain flowing and inventories lean. Once such links are established, a manufacturer, for example, no longer has to guess at a vendor's inventory or future promotional plans, hence forecasts — and sales — improve.

We expect to see widespread use of such processes someday. For now, though, many companies pursue collaborative forecasting in ways that limit its effectiveness, if they pursue it at all. In some cases, not enough departments are involved, while in others, planning meetings aren't held regularly, or support from management is lukewarm at best.

What follows, based on our research and experience, are seven rules companies can follow to make the most of collaboration in their forecasting efforts.