Why do we forecast? So that a VP of Sales can yell at his team to produce more?
Actually, no.
Author Archives: Southard Jones
Is Your Sales Forecast a Bookings Forecast or a Revenue Forecast?
Monday, December 7th, 2009Sales Forecasting Pain and Success: It Starts with the Process
Wednesday, December 2nd, 2009For most organizations, sales forecasting is a time-consuming painful process that results in very little value. As stated in a blog I recently read, the typical process goes something like:
- Collect the forecast from sales reps, and assemble in a spreadsheet
- Roll-up forecast to managers who apply their subjective judgment
- Roll-up manager forecast to VPs who apply their own personal bias
- Roll-up the VP forecast to executives, who change it because it is too low
- Hand over the forecast to operations and finance who toss it in the garbage because they don’t trust it and it’s not timely enough to make an impact to production or planning.
A Well-Rounded Sales Forecast
Friday, November 6th, 2009Hybrid or SUV?
Imagine being a fly on the wall in the Chrysler board room in 2001. Margins were jumping as sales of SUVs boomed; times were good. If management used a statistical forecast based on the previous years’ shipments to predict the future, they would be told one thing: Build more SUVs!
We all know the story: 5 years later (about the time it takes to get a car from design to market), Toyota Priuses were selling like hot cakes and Chrysler was heading toward bankruptcy. Clearly, running your business on a statistical forecast could cause you to miss future trends.
It would be equivalent of driving by looking in the rear view mirror.
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Visibility Into the Present or Visibility Into the Future?
Tuesday, October 13th, 2009I recently read a research summary (Sorry, they’ll make you register if you want to view it) jointly published by SAP and Industry Week. The summary and survey results were quite useful, but let’s wait to discuss those.
The SAP branding was fantastic. Attached to the end of the research summary, is a full page ad of a gentleman staring out over a clean, brightly lit factory floor. The bold SAP tag line reads “In a clear new world/you can see far into the present.”
This is great stuff. If you buy SAP software, you get clear visibility into what is happening on your shop floor right now. You will have visibility into how many parts are spinning off the production line and the current value of inventory. SAP delivers software that “runs” your business on a day-to-day basis; so, logically, it promises they give you clear visibility into your day-to-day business. I’m not being sarcastic; this is critical information for executives. If you are running SAP, SAP is probably the best software to provide you visibility into your day-to-day business.
However, ask yourself, how do you maximize your decisions? Are your decisions based on what is happening right now or are they based on what will happen in the future? Let’s make it personal, imagine making these decisions:
- How many Xboxes do you build for launch?
- How many people do you hire next quarter?
- How do you reduce your inventory levels?
Do you make these decisions based on the number of Xboxes churning off the production line right now? Or the number of employees currently in your organization? Or the current value of your inventory? Surely, that information factors into your decision, but what information is key to your decision?
Imagine how your decision would change if you:
- Knew the market demand for Xboxes upon launch
- Knew your revenue next quarter (to plan hiring)
- Knew how many units will ship next quarter (to plan inventory)
How do you make your decisions?
Executives make decisions based on what they think will happen in the future. They use current data to influence those decisions, but the best data would be an accurate sales forecast. If executives were armed with a trusted forecast, then they could confidently make decisions that deliver better business results.
Back to that SAP and IW research summary: the subject was “collaborative demand and supply planning.” One of the key takeaways of this study was the importance of forecasting. SAP and IW summarize the results: “forecasts should be continuously improving to be more accurate. If this is not happening, it will hold back all other significant improvements to supply and demand planning.”
The research speaks: companies demand a view of the future. If SAP gives you clarity into the present, who delivers clarity into the future? Who delivers a clear forecast?
Right90 does.
Right90 delivers a trusted, actionable forecast. Companies are using Right90 to get a clear and trusted view of the future, so that they can confidently make critical business decisions and reap better business results.
Spreadsheet and Home Grown Sales Forecasting: It’s time to move on
Monday, August 31st, 2009Your organization has become increasingly sales and marketing focused; with the rise of the VP of Sales to much more strategic role. But, your company is still using spreadsheets for sales forecasting!
Does it bother you that such a strategic process is being run with stone-age technology? It should. The bad news: You are missing significant value and risk being overtaken by your competitors. The good news: Misery loves company. According to Ventana Research, 49% of companies are still in using archaic (Excel or home-grown solutions) methods to automate sales forecasting.
So, how do you explain to the now strategic VP of Sales why your company should move off spreadsheets or some other home-grown solution and give you weekends with your family?
Spreadsheets:
- Spreadsheet hell. When is the last time you were in a forecast meeting and you spend more time arguing who had the latest version of the “final final plan.” One of our customers actually had NINE different versions of the Annual Operating Forecast. The CEO and CFO had different versions!
- Lack of accountability. If everything is in spreadsheets, it is virtually impossible to measure forecast accuracy or hold sales reps accountable to their forecast. They can always argue “you had the wrong version—here is the correct one—and my forecast was correct!”
- Garbage in = Garbage out. Many companies use JIT or Lean Concepts for SCM and Demand Planning Applications, yet they use spreadsheets for forecasting. It seems crazy that the back-end of the cash-to-cash process is highly automated like a finely tuned machine, but the front-end is being run by an archaic process using spreadsheets. If you expect to get a great production plan based on your wonderful SCM and Demand planning application, you are mistaken; those applications take Sales Forecasts as a primary input. If the Sales Forecast is no good, then the Demand Plan will no good.
Home-grown
- Hit by a Bus Syndrome. One of our customers had a wonderful home-grown forecasting solution. One smart IT person built and maintained it. He went on a two week vacation, the system broke down and the company was literally crippled. Should your company run a strategic business process with a single point of failure?
- It’s in the IT Queue. When is the last time you re-aligned your territories? Or re-arranged your product hierarchy? Can your IT group keep up with your business changes? Typically, not. That means you get in the IT Queue and wait for your home-grown solution to catch up to changing business models. Sales Forecasting (and the VP of Sales) can’t wait for the IT queue.
Sales and marketing differentiated businesses make crucial decisions based on the sales forecast; they need to grow up from spreadsheets or they will lose to competition who prices more competitively and has faster product availability. How do best-in-class companies price competitively and have faster product availability? They are best-in-class forecasters and they don’t use spreadsheets.