Forecast Pro | Tips and Tricks

Forecast Pro Tips & Tricks: Establishing a Collaborative Forecasting Process Using Forecast Pro Unlimited and Forecast Pro Unlimited Collaborator

In many cases, better forecasts result when the forecasting process combines statistical forecasts and judgmental adjustments (or overrides) from multiple sources. The underlying assumption is that all of future demand cannot be captured by looking at history alone, and that quantitative analysis and qualitative analysis each add value to the final forecast.

From a Spreadsheet World
Many forecasters use Excel for forecasting. In fact, a 2003 survey of 240 US corporations revealed that 48% use spreadsheets for forecasting.

Forecasters who use Excel often describe a forecasting approach where simplistic analysis of historical data is the first step. When asked to describe their “models”, a common response goes something like: “my spreadsheet contains historical data (e.g., most recent 12 months, most recent 52 weeks) and I have a formula that establishes the initial forecast by looking at demand in the last few periods and at demand last-year-same-period.” Often, the description continues with qualifying statements such as “then I massage the numbers,” or “after that, I create a report for management review,” or “then a spreadsheet with my numbers goes to sales and marketing for their input.”

Excel is a powerful, flexible tool that is certainly appropriate for many types of analysis. However, when applied to forecasting, it often fosters ad hoc processes that rely on widely varying formulas and large, unwieldy spreadsheets full of potential shortcomings and risks. Indeed, many corporations who forecast using Excel are quick to lament that their spreadsheet-based forecasting process is extremely complex and has become the sole domain of the individuals who developed it, making it difficult or even impossible to maintain, understand and transfer as the business (and its forecasting staff) changes.

Standardized Approaches and Tools
Forecast Pro Unlimited and Forecast Pro Unlimited Collaborator provide a backbone for forecasting processes where: a) all members of the forecasting team use the same objective, explainable and replicable set of methods and models for analyzing historical data and establishing the “baseline” forecast, b) all those involved in the process, regardless of their roles, work within a common framework and user interface and c) judgmental adjustments are made transparently with underlying assumptions clearly documented.

Typically, the forecasting team is organized such that certain individuals have hands-on responsibility for generating the statistical forecasts and others have hands-on responsibility for forecast review, adjustments and overrides. When Forecast Pro Unlimited and Forecast Pro Unlimited Collaborator are used together in a workgroup, the “forecasters” use Forecast Pro Unlimited and the “reviewers” use Forecast Pro Unlimited Collaborator. The only real difference between the two products is that the Collaborator cannot generate the statistical forecasts.

Typically, the forecasting process operates as follows:
Step 1: Generate a statistical forecast in Forecast Pro Unlimited, using the most up-to-date historical demand data as the input. This initial forecast is sometimes referred to as the “baseline forecast.” The statistical forecast captures important demand patterns like level, trend and seasonality. This forecast can be generated completely automatically, where the Forecast Pro Unlimited Expert System makes all of the decisions on the forecast model, or alternatively, the forecast analyst can take a more hands-on approach, opting for top-down forecasting, promotional modeling, indexing, etc.
Step 2: Pass the baseline forecast to those in your organization whose role is to review the forecast and add their domain knowledge. These individuals use Forecast Pro Unlimited Collaborator. Collaborator users don’t develop the baseline forecast. They receive it from the forecaster in the form of a “Forecast Document”. The Collaborator user reviews the statistical forecast and answers the question: “Where should we deviate from the statistical forecast and why?” Perhaps sales knows that a major customer is expanding rapidly. Maybe marketing is significantly stepping-up promotional activities in specific product lines. Upper management could be pursuing an aggressive acquisition strategy. Operations may know about key raw material shortages, etc.
Step 3: Submit the (agreed upon) “Final Forecast”, which is the combined statistical forecast plus overrides.

Although it may seem convenient to use Excel for forecasting—it’s on everybody’s desktop, users are already comfortable with it, most can move data back and forth between Excel and their corporate ERP with relative ease—it’s extremely important that managers also understand and recognize the limitations and downside inherent in spreadsheet forecasting. In the spreadsheet environment, forecasters too often end up working in relative isolation, using complex spreadsheets and ad hoc “models” to analyze history and generate forecasts which are then “tweaked” with by various stakeholders with little or no documentation of underlying assumptions.

One solution is to jump to large-scale demand planning or supply chain planning systems. However, this is a major corporate undertaking where $100K+ price tags and six to twelve month implementations are the norm. Forecast Pro Unlimited and Forecast Pro Unlimited Collaborator offer a measured next step from the spreadsheet forecasting world. For modest sized workgroups looking to improve and standardize the way they analyze history and generate a baseline forecast, and to formalize and document how domain knowledge and judgment are incorporated into the forecast, the Forecast Pro Unlimited-Forecast Pro Unlimited Collaborator solution is the right choice.

Click here to download the Forecast Pro demo, which includes a demo of Forecast Pro Unlimited and Forecast Pro Unlimited Collaborator.

It should be noted that those who are not working in a team environment, and who are solely responsible for creating the statistical forecasts plus overrides/adjustments, can do so in Forecast Pro Unlimited. In addition to a full range of statistical modeling capabilities, Forecast Pro Unlimited contains all of the override functionality contained in Collaborator.