How Smarter Forecasting Changes the Way We Deal With Data, Methods and Uncertainty in the Supply Chain
Getting them to take a different path, a new path. The question is, are we talking to the elephant or the rider?
As demand forecasters we must strive to induce needed change—change in the way we deal with data, quantitative methods, and uncertainty. Encouraging planners and managers to rethink their goals for demand forecasting. Motivating them away from how they have always dealt with forecasting “Hey. Forecaster, what are your final numbers?”
The Elephant and the Rider Metaphor
The Elephant is the emotional side of motivation, while the Rider is the logical side. Perched atop the Elephant, the Rider holds the reins and seems to be the leader. But the Rider’s control is precarious because the Rider is small relative to the Elephant. Anytime the six-ton Elephant and the Rider disagree about which direction to go, the Rider is going to lose. He’s completely overmatched.
We have to examine how these two internal motivations play together (or not). The most obvious examples we most can relate to are sticking to a diet, staying on an exercise program, or quitting smoking. We know it is the right thing to do (Rider) but we have a difficult time sticking to it (Elephant).
The Elephant and Rider are the yin and yang of our psyche. The Rider is the planner or manager (getting thin on a diet), while the Elephant is attracted to the short term payoff (enjoying an ice cream cone).
Changes often fail because the Rider simply can’t keep the Elephant on the road long enough to reach the destination.
1. Prepare: Define the purpose and role of the job or organization, define the major areas of responsibility, set objectives, and establish indicators of performance.
2. Execute: Define short-term goals and action plans, and carry out a plan for each area of responsibility.
3. Evaluate: Perform forecast monitoring (define objectives for the forecaster), know what to monitor, develop a measurement plan, develop metrics of forecast accuracy, and develop scores for performance.
4. Reconcile: Select the most credible approach, integrate demand forecasts, support database forecast decision support in the cloud, and get top management involvement.
What is the purpose of a demand forecasting job or organization? This requires considerable thought. It is difficult to be agile unless one knows what it is that needs to be accomplished (see ). One role of a forecast manager is to serve as an advisor to a company’s senior management and managers of end-user organizations. To fulfill the other part of the role, a forecast manager must manage colleagues and their work. Here is a mission statement:
The responsibility of a demand forecasting organization is to provide top-quality advice—primarily about future demand for a firm’s products and services under conditions of uncertainty.
One can spend many hours wrestling with the purpose of the job. In addition, developing meaningful indicators of performance is no easy task and can give rise to many debates. Experience will cause us to reject some indicators and replace them with others that are more relevant. Naturally, both the indicators and attendant levels of performance will change over time as the business evolves.
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