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Fall 2009 Issue

Special Feature: Forecast Process Design

  • Preview by Len Tashman, Editor
    Welcome to a new series of articles on the subject of forecast process design, the infrastructure through which forecasts are created, communicated, reconciled, and turned into plans for organizational action. In this and the following two issues of Foresight, Joe Smith, the series author, will examine the impetus for a structured process, discuss major process-design considerations, and introduce a set of indicators needed to gauge success in process change and adoption. His perspectives are synthesized into the Forecast Reliability Assurance Model, or FRAM©.
  • The Alignment of People, Process, and Tools by Joe Smith
    I entered the process-design realm relatively early in my career when I managed pricing and trade-spend controls for a division of one of the U.S. beverage multinationals. I was officially in the business of assuring that tens of millions of dollars of invoice deductions was money well spent – or curtailed. As you might imagine, this was hardly a walk in the park – the number of daily invoice transactions was staggering – but the job came with a capable team and a set of state of- the-art software tools. I reported directly to the division general manager. Within the organization, the initiative was acknowledged to be of the highest priority – so important, in fact, that the company president himself was pushing for it. I felt a little like one of the Blues Brothers: “We’re on a mission from God.”
  • People, then Process, then Tools, But What if the People and Toolset are Frozen? by Ian Watson-Jones
    Joe Smith lays out his preferred sequence for developing new forecasting capabilities: people, then process, then tools. In an ideal situation – a growing company in need of world class processes, but with no existing staff or tools – this would indeed be an effective way to proceed. However, not all managers are so lucky. The team may already be in place and, despite gaps in talent, cannot be replaced. Technology strategy may revolve around a major vendor, such as SAP or Oracle, pre-selecting the tool to be used. If the people and the toolset are frozen, what do you do?
  • Commentary: The Alignment of People, Process, and Tools by Mark Moon


    1. Can Managers’ Judgmental Forecasts Be Made Scientifically? by Philip Hans Franses
      What is the basis of the adjustments managers make to the statistical forecasts for their product lines? You would expect that intuition plays a role and, of course, there are organizational pressures that come to bear. Research by Philip Hans Franses raises the intriguing possibility that the factors involved in the manager’s judgmental forecast can be modeled statistically. An equation that attempts to replicate a forecaster’s judgment is called a judgmental bootstrap. This case study suggests that judgmental bootstraps can become a useful tool in the forecasting process.
    2. Case Study: Forecasting the Productivity of Professional Services by Tonya Boone, Ram Ganeshan, and Robert Hicks
      In this case study of an architectural/engineering firm, Tonya, Ram, and Robert offer a new technique for projecting the scope and costs of professional-service projects. They utilize historical monthly data to estimate relationships between project outputs on one hand and labor inputs and prior experience on the other. Their model promises to be an upgrade for firms that traditionally develop judgmental projections without the benefit of formal statistical analysis.
    3. Software Review by Rick Hesse
      Using Excel to Forecast: A Review of Two Recent How-To Books
    4. Hot New Research Column: Taking Stock: Assessing the True Cost of Forecast Errors by Paul Goodwin
    5. Book Review by Roy Batchelor
      Animal Spirits by George A. Akerlof and Robert J. Shiller
    6. S&OP Column: How Jarden Branded Consumables Made Forecasting Simpler & Better through Executive S&OP, by Robert Stahl and Brad McCollum
      We spotlight a case study of the demand side of the equation – forecasting – that shows how Executive S&OP facilitated significant improvements in the generation and use of sales volume forecasts. The case study features the Fresh Preserving Division of Jarden Branded Consumables, headquartered in Daleville, Indiana.


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