The Demand Planner’s Dilemma: Is a Forecast Just a Number or Something More?
Tens of thousands of years ago, if you asked a group of tribe members and community leaders to raise their right hand if they believed the earth was flat, all hands would go up. Still today, some people would do so, but if you were to ask a group of supply chain planners and managers today whether they believe a forecast is just a number, most hands would go up also. What is wrong with this picture? Today most people would not raise their hand for a flat earth theory, but they do appear to believe that a forecast is just a number. A flat earth mindset in forecasting does prevail.
Imagine taking a long airplane trip between Chicago and Shanghai. On the cabin screens, you can follow your flight on the flat earth map in front of you. Following a best flat earth forecast of fuel needed would take you along a straight line on this map. But, why does the pilot not follow your forecasted number of the quantity of fuel needed? The airplane appears to be flying a much ‘longer’ flight that is curved. How accurate would that appear to a flat-earth forecaster?
While we know a curvature dimension must be added to a flat earth model to be accurate, should demand planners and managers continue believing and behaving as if a demand forecast is just a number, ignoring uncertainty as an essential dimension of variability?. Uncertainty is a certain factor in demand forecasting and should not be ignored in a smarter forecasting process.
Because of the potential value to agile forecasting®, I explain these smarter tools for demand planners and supply chain practitioners in my new book Change & Chance Embraced: Achieving Agility with Smarter Forecasting in the Supply Chain. The book is available in paperback and e-book online along with some 5-star reviews.
Should Demand Planners Continue to Just Predict Forecast Numbers?
Because effective, virtually free computing and inexpensive data storage is now widespread, quantifying uncertainty is an essential opportunity if you use statistical models rather than flat earth methods like moving average forecasts, RMA decompositions and manual manipulation of exponential smoothing parameters for forecasting.
The Metaphor of the Elephant and the Rider
“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 over-matched.”
Are we talking to the elephant or the rider?
- For demand planning we may need to induce change. A change in direction
- Getting people to rethink their forecasting approach is about motivating them away from what they are doing today
- Getting them to take a different path – a new path
- The question is: Are we talking to the Elephant or the Rider?
Hans Levenbach, PhD is Executive Director, CPDF Training and Certification Programs. He conducts hands-on Professional Development Workshops on Demand Forecasting for multi-national supply chain companies worldwide. Hans is a Past President, Treasurer and former member of the Board of Directors of the International Institute of Forecasters. He is group manager of the LinkedIn groups (1) Demand Forecaster Training and Certification, Blended Learning, Predictive Visualization, and (2) New Product Forecasting and Innovation Planning, Cognitive Modeling, Predictive Visualization.
I invite you to join these groups and share your thoughts and experiences.