Supply Chain Blog

Get your teeth into FMCG Demand Forecasting & Customer Service

Posted by Dave Jordan on Mon, Mar 18, 2013

Is anybody good at forecasting? Meteorologists have had centuries of trying and still the weather catches us by surprise. I think this is particularly so in UK where weather related discussions are an important part of daily life. If people paid no attention to the weather then it would not be such a shock but it is top of mind in UK and my theory is that is why the UK is perceived to have the worst weather predictors. Remember Michael Fish.......

ForecastingFootball match results are hard to forecast as there are so many variables. What if the star player gets injured? What if heavy rain makes the pitch difficult to play on? Every year cup matches throw up unexpected results when part-time minnows from lower leagues beat the mighty giants of the top division. Who can forecast that?

How many Romanians will move to UK in 2014 is currently a high profile forecasting debate. I have seen figures from 7½ people to almost 5% of the population. In the latter case you can expect to see a fleet of Airbus A380's stacked above Otopeni airport.

What about FMCG?  Companies spend millions on trying to improve and then maintain forecasting quality. Consumer habit studies tell producers how much product is used or consumed in homes and outlets. Market research helps to define the optimum formulation or colour or packaging that will delight consumers. Sales and marketing predict the effect of advertising campaigns and promotions. A lot of time and effort goes into trying to develop a reasonably accurate forecast and many companies still struggle to achieve decent figures.

Then there are dogs.

The same consumption studies are carried out as above but how do you know how many dogs are in your universe? Some countries do have regulations and licencing for domestic pets but most do not. Dog licences in UK were abolished in 1987 when the cost was a meager 37p! Certainly, Romania does not have such a scheme so how do pet food producers know how to forecast demand here? Many dogs are owned as pets or for security but I suspect the number of stray dogs is in the majority. These stray dogs all seem to survive so somebody must be feeding them something but what a challenge for pet food forecasters.

The point is that producers may not be seeing the real demand and therefore forecasting will always be poor. Do you see the true unadulterated demand in your company?

  1. Do you sell what you have in stock rather than what customers actually want?
  2. Is your Customer Service measure honest? Is it measured against pure customer orders?
  3. Is the wrong function recording and reporting Customer Service performance? Keep the team honest by segregating duties.

If your Customer Service measure is riding high yet you are not seeing expected growth then take a close look at Customer Service measurement.  If you are not seeing gross demand then you are missing out on a significant top and bottom line improvement.

Don’t let your company go to the dogs!

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Tagss: FMCG, Dave Jordan, CEO, Performance Improvement, Supply Chain, S&OP, Forecasting & Demand Planning