The Dark Art of Forecasting

Suddenly we are beyond the halfway point in the year.  Peak planning will be underway, or nearing completion, in many operations and most will be wrestling with the knotty problem of producing a reasonably accurate forecast.

Forecasting is all about eliminating surprises, but it is no easy task when outcomes are influenced by so many external factors – and the cost of an inaccurate forecast can be potentially tricky for your business.

So, is Forecasting a Dark Art… or is it more of a Science?

For sure, being able to access comprehensive data about your operational costs can make forecasting more of a scientific process. It takes out much of the guesswork and creates a strong framework for more accurate predictions.

Why forecasting is such a challenge:

  • When volumes don’t materialise, but costs are incurred anyway

Creating capacity in readiness for a planned activity that doesn’t materialise is a fact of life.  It has the effect of distorting the cost to serve if the capacity cannot be squeezed out.

It also distorts year to date and full year numbers because whether the operator likes it or not, the cost was incurred even if the volume didn’t arrive.

  • Dealing with the peak

Errors may increase during peak periods with lots of new people around, but there is an opportunity to determine if increased targeted inventory counting is a useful counterbalance, or post-activity auditing is required so that these costs are included in the budget.

  • Unexpected events

Some things are beyond your control and can’t always be predicted. Inbound delays can affect launches and disrupt space plans, or competitor activity may warrant a change in campaign dates. The weather might force a change in plans.

Customers’ responses to the proposition may not reach sales expectations leaving unsold stock, which adds to the space problem.

Surprises are unwelcome in nearly all corners of business whether it be volumes or costs, but by understanding and factoring in the variables, the components for more accurate forecasting are suddenly within reach.

Here’s where Vitesse can help. Speak to us today.

Louis Hill

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