{"id":930,"date":"2010-08-27T10:00:25","date_gmt":"2010-08-27T14:00:25","guid":{"rendered":"https:\/\/demand-planning.com\/?p=930"},"modified":"2010-08-27T10:00:25","modified_gmt":"2010-08-27T14:00:25","slug":"how-post-cereal-prepares-accurate-forecasts-from-promotional-and-marketing-activities","status":"publish","type":"post","link":"https:\/\/demand-planning.com\/2010\/08\/27\/how-post-cereal-prepares-accurate-forecasts-from-promotional-and-marketing-activities\/","title":{"rendered":"How Post Cereal Prepares Accurate Forecasts from Promotional and Marketing Activities"},"content":{"rendered":"
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David Zatz <\/p><\/div>\n

One of the interesting things about forecasting finished goods is how many functions participate in the development of the forecast and are subsequently impacted by the results.\u00a0 In a typical S&OP and consensus forecasting process, Sales, Operations and Planning collaborate to reach a best forecast to drive the operations and profit forecast for the company.\u00a0 We struggle to make this process work because each function has a different view toward the development and use of the forecast.\u00a0 Supply Chain needs the forecast at the SKU level by location, usually in cases.\u00a0 Sales is forecasting revenue and cases by customer.\u00a0 Finance is calculating net revenue and profit based on the product mix forecasted usually divided into price category groups.\u00a0 And Marketing forecasts at the brand level in gross revenue for a mid to long range time frame.\u00a0 You can put these differences into a chart that looks something like this.<\/p>\n\n\n\n\n\n\n\n
Function<\/strong><\/td>\nUnit of Measure<\/strong><\/td>\nTime Frame<\/strong><\/td>\n <\/strong><\/td>\n<\/tr>\n
Sales<\/strong><\/td>\nCases, Revenue<\/td>\n1 to 3 months<\/td>\nCustomer<\/td>\n<\/tr>\n
Operations<\/strong><\/td>\nCases<\/td>\n1 to 6 months<\/td>\nBy SKU<\/td>\n<\/tr>\n
Finance<\/strong><\/td>\nPounds, Revenue<\/td>\nCurrent and next fiscal year<\/td>\nPrice Category<\/td>\n<\/tr>\n
Marketing<\/strong><\/td>\nGross Revenue<\/td>\n4 to 24 months<\/td>\nBrand<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

And the ways we each arrive at our forecasted volume is different which makes for a diverse set of numbers to start the process.\u00a0 The S&OP process is not about the differences between the functions but the need to reach a consensus to find the one number<\/em>, the best number to drive the operations and forecast profit for the company.\u00a0 In order for an S&OP process to be successful, those are two of the goals that must be achieved: agreeing on \u201cone number\u201d which is of course a series of numbers, and that it is the best guess call, not biased toward under calling to beat the forecast or over-calling to ensure adequate inventory.<\/p>\n

Most forecasting techniques used, especially in the Supply Chain function, use actual shipments from the past to project the future.\u00a0 The tools to do this have gotten very sophisticated over time and enable us to use huge extracts of data to generate fairly accurate detailed, low level forecasts going forward.<\/p>\n

Forecasting in the Marketing function utilizes a very different approach which brings a perspective to the S&OP process that enables the diverse views to reach a consensus and find the best number when compared to statistically derived forecasts.\u00a0 In Marketing, we start with the actuals from the same month last year, itemize the factors that drive our business, and compare the revenue impact of each of those drivers compared to one year ago.\u00a0 These drivers include<\/p>\n