An accurate forecast is essential to your business in that it can be a great indicator of how well your sales and operations planning processes are going. Many companies see an inaccurate forecast and want to panic, but there is the chance that that inaccuracy is due only to a bias in your workflow. It is important to understand what a bias is and how to minimize it. You also want to learn how to maximize your forecast value add.
What is Bias?
A bias is one of the main reasons that you will see inaccuracies in your company’s forecast, but what exactly is a bias? Put simply, a bias is something within your workflow that might be causing your planners to wrongly estimate demand levels. Whether your demand planners are underestimating those demand levels or overestimating them, this is an issue that needs to be corrected so that you can more accurately estimate future demand levels and plan your business accordingly.
How to Reduce Bias?
Thankfully, companies do not have to sit idly by and accept any bias that is present in their workflow. There are actually a few solutions that can work to reduce bias, it is a simple matter of discovering which solution works best for your company. One of the most important changes you can make is to invest in a forecasting tool. This tool will help you monitor the forecasts and detect any patterns that your demand planners should be aware of.
What is Forecast Value Add (FVA)?
The forecast value add is an important metric in any sales and operations planning part of a business. This metric evaluates all performances of any steps in the forecasting process. This evaluation will then determine which steps are the most valuable, and which steps are more likely to add inaccuracies to the forecast. After using an FVA, your company should be able to see which steps help the most, and which ones you should probably kick to the curb.
How to Maximize Forecast Value Add (FVA)?
One of the main ways to maximize your benefits from forecast value add is to measure it quite often. This will help you ensure that your company is running as smoothly as possible by helping you better understand which steps in your processes work the best for your company and give you the best demand forecasting results. Likewise, you will also be able to closely monitor those steps that seem to be making your demand forecasting worse. You will be able to keep an eye on these steps and determine if they are indeed damaging your company before removing those steps.
If you follow these steps, you are sure to see a decrease in the bias apparent in your demand forecasting. You will also see increases in your FVA or Forecast Value Add. With both of these consequences, your company’s demand planning is sure to improve. This will allow your company to better predict future demand levels and adapt your output.