What’s your forecast accuracy telling you? Stop and ask a few questions
Forecast accuracy is an important performance metric in any effective S&OP process, but it can be measured in various ways. Comparing your company’s accuracy to an industry standard will be difficult to impossible if you don’t know the details behind the measurement. More importantly, the metric needs to resonate within your organization as a meaningful indicator of forecast relevance. So then…
What details should one consider for forecast accuracy measurement?

Here’s the Steelwedge Top Six:
1. Aggregation level: Are you measuring accuracy at a product SKU or family level? What about other hierarchy levels? Odds are your accuracy will appear to be better at an aggregated level such as family. This happens because variability of forecasts and actuals tend to cancel out one another as data is combined. The result is a smoothing of results and lowering of error calculations. Recommendation: Measure accuracy at the same level as the majority of forecasts are captured.
2. Error Calculation: In its most basic form, accuracy is a measure of the difference between a prediction and what actually happened. How far off were we? Error is equal to the difference between forecast and actual. Often, this is captured as a percentage value called percent error. Mean absolute percent error (MAPE) calculates the average of errors. Since we don’t want positives and negatives to cancel out each other, we use the absolute values of each error. There are other methods, but MAPE is fairly common. Weighted MAPE is a method used to give greater importance (weight) to items with greater activity. Amount of activity may be defined as the proportion a particular item is of the total. Recommendation: Keep it simple. Make sure people understand the measurement and how…

Steelwedge Software today announced a new product release for its Sales Planning & Performance Management (SPPM) solution featuring One-Click-Planning” TM. One-Click Planning features a new Steelwedge Planning Work Center that provides users visibility to critical planning, transaction and performance management data required to execute the S&OP process.

One Click Planning enables global enterprises to achieve maximum financial and operational performance from their S&OP process by providing executives and users the ability to go directly from an email alert to value-added planning and exception resolution. “One-Click-Planning enables Steelwedge to build on its leadership position in the S&OP marketplace”, said Steelwedge VP, Product Management Chris Givens. “Based on our strong track record in helping enterprises enable collaborative sales forecasting and bridging the gaps between sales and operations, our customer feedback was a key driver for us to enhance our existing workflow and adding the new work center, to be more streamlined, user friendly and configurable.” “Existing Steelwedge customers and prospects are extremely excited about the new release because it will have a significant impact on their S&OP processes and financial and operational performance”, said Steelwedge CEO Glen Margolis.

“While our current Steelwedge solution is critical to enabling the collaborative sales forecasting and operations planning process, we are pleased with Steelwedge “One-Click Planning”, which further streamlines our planning efforts, providing quick access to the information we need to make faster decisions that impact the bottom line,” said the COO of a leading high technology manufacturer and Steelwedge customer. One of the long standing challenges of S&OP is to provide an automated workflow driven solution that engages executives and planners across multiple functions to update plans on a scheduled and exception basis.…

Leading companies are increasingly using external partner collaboration to improve value chain performance.  As a result of enthusiasm around trading partner collaboration, an industry standard was adopted and implemented by industry leaders during the 1990’s. It was called Collaborative Planning Forecasting and Replenishment (CPFR).

CPFR was originally a vision of WalMart in the mid 1990s. The basic principle says that if a more accurate forecast of demand is created and replenishment is executed using this more accurate collaborative demand forecast, then significant costs can be removed from the value chain without impacting service levels.  The CPFR vision also said that, to have the most accurate forecast, everyone should have access and visibility to a single forecast number so all links in the value chain can contribute their knowledge of causal factors in which to collaborate and update the forecast to be more accurate.

However, the state of the art in regard to information systems to support CPFR was abysmal.  Corporation were struggling to get new ERP systems up and running, data integrity was horrible, and IT bandwidth non-existent.  So, the CPFR vision was never fully realized.

Fast forward to 2008.  Eight years since Y2K – the now infamous IT bogey…  Today, systems have matured while hosted (OnDemand or SaaS) CPFR solutions are available that offer high security, data validation, and span corporate firewalls.   For Steelwedge, CPFR has become yet another element in its rapidly growing toolset of solutions (which includes collaborative forecasting, sale and operations planning S&OP, demand planning, supply planning).  This toolset supports the integrated business planning requirements of companies facing intense global competition.  CPFR is no longer a vision but rather an imperative.