Should My Business Forecasting Process and System Be Weekly, Monthly (Or Both)?

One of the biggest questions in establishing  a new business forecasting process is the level of detail of the forecast from a product dimension as well as a geography/channel dimension.  The third key dimension is time.  The process stakeholders in operations usually want to drive all of the forecast dimensions down to the finest level of time detail, which is typically weekly, while finance is focused on the quarterly reporting time period and the monthly forecasts which build up into that time period.

The process owner can’t make everyone happy, or can they?

What are the factors which should drive that decision?  The first issue is always whether there is the organizational bandwidth to go to weekly forecasting.  If true weekly forecasts are desired then the organization needs to have the people and processes in place to manage and be accountable for the weekly numbers.  A simpler way to put it is never plant a lawn bigger than the one you want to mow.

A second factor is whether or not the new business process system eliminates at least half of the Excel spreadsheets that have the word ‘Forecast” in their title.  If it doesn’t, then the new system is probably forecasting at a level which is going to be too high for the needs of your organization.   That’s a sure sign that there is a need for weekly forecasting as well as other drill downs on product and geographic/channel attributes.

Do weekly and monthly numbers ever have to true up? If they do, you probably need to support both weekly and monthly in a formal system and have business rules to convert the forecasts back and forth between weekly and monthly.

Regardless of your decision, software like RoadMap GPS has the flexibility to operate in a weekly or monthly mode, as well as the ability to switch back and forth between modes at the touch of a button.

RoadMap GPS can switch from weekly to monthly mode at the touch of a button.
RoadMap GPS can switch from weekly to monthly mode at the touch of a button.
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RoadMap GPS Public Edition

Forecasting is essential to everyday life as it helps you plan your day.

We check the weather forecast to decide what to wear. We check the political polls to see if our candidate is likely to win or lose before considering buying tickets to a candidate’s fundraiser. We check the Las Vegas betting line to see if our football team is likely to win before we wager lunch with our co-worker on the outcome of a big game.

In the business world, we are constantly planning all sorts of things – production, revenue, profits at very detailed levels. Forecasting Big Data can cause nothing but huge migraine headaches if you don’t have the right power tools to help you get through it.

RoadMap GPS has been that power tool that many companies around the world have relied on to drill down into these huge data sets and give users as clear a view of the future as possible by just looking at past data.forecasting_energy_demand free_forecasting_software_excel

In RoadMap GPS Commercial and Cloud editions, we have many other features to the technology, but the statistical forecasting capability has always been a core strength of the software.

With this Public Edition, we are allowing student and other non-commercial users the ability to use RoadMap GPS for educational and non-commercial use.

This edition is not designed for Ph. D. statisticians. It’s designed for students in Managerial Economics, Finance and Supply Chain Management Programs at the B.S. and M.B.A. level.

We hope that it will be useful in your research.

We also wouldn’t mind you buying RoadMap GPS Commercial Edition when you get a real job.

Fill out the on-line form to see if you qualify or download the RoadMap GPS Public Edition License Agreement

RoadMap GPS – Geneva Expert System

RoadMap Global Planning Solution

RoadMap’s Global Planning Solution provides four different enabling technologies that help organizations make accurate business plans for the future:

  1. Geneva Expert System
  2. Planning Workbooks
  3. Data Warehouse
  4. Cloud Deployment

Over the next few weeks, each of these technologies will be explained in detail on this blog – beginning with the Geneva Expert System.

The explosion of information technology created a huge challenge as well as an opportunity for business planning.  Product life cycles shortened.  New product launches occurred more rapidly. Point of sale and downstream distribution data gave planners a better view of consumer demand.

Business Forecaster circa 1970But forecasting was stuck back in the days of the IBM/360 mainframe computing.  An old dude wearing coke-bottle glasses, tethered to a mainframe computer terminal, mumbling about autocorrelations and ergodicity, working for hours at a time on a single product forecast. There had to be a better way… and we found it.

 

Sunspot Data by Year (NASA)
Sunspot Data by Year (NASA)

Instead of trying to forecast sales in the 21st century using the old forecasting methods which were used to forecast sunspot data starting from the year 1750, we figured that it would make more sense to start with business data.  Lots of it.

Through consulting engagements, we were able to assemble of huge database of product sales and forecasts from many of the leading global pharmaceutical companies, consumer electronics companies, and retailers.  But you can’t just surround a problem with data and wait for it to surrender; we had to go on the attack. But we didn’t use traditional statisticians – we needed people who weren’t trained forecasters.  We rounded up mechanical engineers, physicists, mathematicians and philosophers and turned them lose on this Big Data set with plenty of computing power.

Sales Forecasting Expert System

What emerged after many iterations is the Geneva Expert System, which remains the most accurate business forecasting tool on the market today, compared to business intelligence tools and statistical packages.  Let’s do a quick case study to prove our point.

Remember last summer when it was actually hot?  After the first cookout in May, everyone had a great time, but the mosquitos were awful. Before the next cookout, people stocked up on Citronella candles.  Let’s look at weekly sales of Citronella candles – sales in June (~2500) are 10X sales in December.

Now let’s looks at the second line – The Geneva Expert System forecast.  Despite the erratic history, it automatically comes up with a model that you’d probably think was a reasonable starting point – then you could move on to the hundred or thousands of other products in your product line.

Citronella Candle - Weekly Sales History and Forecasts
Citronella Candle – Weekly Sales History and Forecasts

But not so if you used the leading BI tool.  In that case, since the history ended around Labor Day when sales were declining, the forecast is for rapidly declining sales that end up with large negative numbers.

And the R statistical package using automated Box Jenkins? That statistical package forecasts around 880 in candle sales for each week.  Like a watch that is broken being right twice a day, that weekly forecast is correct only twice a year.

For RoadMap Global Planning, the Geneva Expert System gives planners an accurate and unbiased trend projection into the future.  It’s still up to the planner to assess what events are likely to “bend the trend” to arrive at an optimal forecast.

Case Studies – Energy and Utilities

RoadMap has built forecasting models for many different types of companies in energy and utilities:

  • Weekly Demand Forecasting by PADD Region for Gasoline, Aviation Fuel and Diesel
  • Hourly Electric Power Demand Across an ISO Power Grid
  • Daily Futures Contract Prices for Natural Gas, Gasoline Crude Oil and Heating Oil

Weather is the major demand determinant in Electric Utilities.  In the utility industry the interaction between reduced supply caused by network congestion, maintenance or reduced hydroelectric power availability combined with increased demand from extreme temperatures can cause major supply/demand imbalances and price shocks.

RoadMap’s ability to forecast electricity demand at a disaggregate level of detail and at intervals as short as 30 minutes based on weather patterns gives the utility or ISO a much clearer view of demand and potential supply imbalances.

Case Studies – Media and Entertainment

The Media and Entertainment industries are characterized by very simple supply chains and high profit margins.

RoadMap has built forecasting models for many different types of companies in these sectors:

  • Weekly Attendance at Theme Parks
  • Daily Newspaper Sales by Newsstand
  • Weekly DVD Sales by Title by Store
  • Monthly TV Station Revenue by Advertiser Class

Case Studies – Consumer Electronics

No industry in the world is as exciting as, or more difficult to forecast than consumer electronics, where waves of better, faster and cheaper products flood the marketplace every six months. RoadMap’s technology planning software was developed in concert with industry leaders such as Dell Computers, General Electric and Samsung.

As with the Life Sciences industry, product life cycle management is critical to an accurate forecast. RoadMap’s ability to phase-in and phase-out forecasts for product lines, as well as the ability to forecast price compression curves are essential to producing accurate forecasts.

In many consumer electronics industries, such as printers and copiers, forecasting sales of spare parts and consumables is as important as forecasting original equipment. Higher margins on sales of these service items allow the manufacturers to lower introductory prices of new models of equipment. However, without accurate forecasts of consumables, it is impossible to forecast margins and overall profits.

RoadMap’s ability to forecast across multiple hierarchies allows high technology companies to forecast their sales by brand, by end-user segment (Home vs. Small Business) as well as by classes of product (e.g. equipment vs. consumables).

Case Studies – Consumer Packaged Goods

RoadMap has worked with more than 10 of the largest consumer packaged goods companies in sales forecasting and marketing mix analysis.

RoadMap software can track and plan baseline and incremental volume due to promotion from both POS scanner data and factory shipments. Much of RoadMap’s proprietary forecasting technology was developed in the response to the CPG industry’s need for accurate baseline forecasting. Without an accurate baseline forecast, it is impossible to measure the sales or financial impact of trade and consumer promotions.  RoadMap’s baseline technology is so advanced, that it can generate weekly baseline forecasts at very low levels of detail – by UPC, by Account – and for new products.

RoadMap’s causal modeling capabilities allow marketing managers to estimate the impact of price reductions, feature ads, displays, consumer promotion and TV spending on brand sales. With accurate evaluation of historical marketing programs, managers can design and execute optimal marketing plans for their brands.

Case Studies – Life Sciences

RoadMap’s first clients were in the Life Sciences industry. More than 10 of the Top 25 Pharmaceutical companies have implemented RoadMap solutions for:

  • Sales and Operations Planning
  • Strategic Forecasting
  • Patient Persistency Models
  • Patient Adherence Analytics
  • Sampling Analysis
  • Promotion Analysis
  • Patient Website ROI

RoadMap software can analyze models of RX data by patient. These models can predict patient persistence and adherence to therapy based on patient demographics, sampling, payer behavior and ICD-9 Codes.  These predictive models have proven to be highly accurate in both short term and long term forecasting.

Predictive Analytics in Life Sciences: Co-Payment Mitigation

Specialty pharmacies have emerged as a strategic distribution channel for pharmaceutical and biotechnology companies, as the dollar share of distribution by this channel will soon reach 40% of the U.S. market. Specialty pharmacies provide a wide variety of services beyond filling an RX.  Patient support coordinators assist patients in administration of drugs, coordination of insurance benefits, adherence to therapy and scheduling of refills

Privacy concerns over patient data can be addressed by the process of de-identifying patient data which removes all personal information from prescription records while maintaining important data on demographic groups, insurance coverage and medical conditions which are necessary to model behavior at the patient level.  Patient level analytics allow drug companies to model persistency of therapy and adherence, which are often critical to patient outcomes.

Co-Payment Mitigation

With rising prescription costs and economic pressures, payers have shifted more specialty drugs into higher co-payment tiers.  Without co-pay mitigation, many patients face hundreds of dollars of copayments per month, which have an enormous impact on adherence to therapy.  With patient analytics, life science companies can develop and optimize programs to buy down co-payments for patients, therefore maintaining high quality access to needed medications.

Utilizing Big Data For Strategic Patient Insights:

Patient-Level Modeling Ensures That All Impacts on Patient Behavior Are Captured.

Not so long ago, pharmaceutical companies had to try to analyze the impact of marketing programs using monthly RX data by sales territory or physician decile.  Insights on patient behavior were gleaned from pharmaceutical call reporting systems and survey research with doctors.

RoadMap utilizes state of the art nonlinear statistical modeling techniques that are specifically designed to model the behavior of hundreds of thousands of individual patients on a daily basis.  Unlike linear models used for aggregate RX data, nonlinear models use statistical distributions designed for discrete patient choices such as Binomial and Multinomial Logits.

Event based models of individual patient persistency on therapy also require nonlinear methods like the Cox Proportional Hazards model.  Despite the sophistication of the models, RoadMap is committed to explaining and documenting all modeling results, so that management does not have to rely on a fragile “Black-Box” approach for critical strategic insights.Image

RoadMap Global Planning Solution

RoadMapGPSRoadMap Global Planning Solution

As the world’s economy continues to recover, forecasting has never been more important to an organization’s ability to successfully achieve growth.

RoadMap software is the essential technology that your business needs to analyze historical trends and gather forecast information from throughout your organization, your customers, and the World Wide Web to ensure that your company is positioned for growth.

NOAA Cloud Image Cloud Based Computing

RoadMap GPS is now available on the Cloud through Amazon Web Services (AWS), the largest and most trusted provider of Cloud services. With RoadMap GPS on the Cloud, growth companies can scale from proof of concept to full production systems in minutes, not months, as Amazon’s Relational Database Service and Elastic Cloud Compute (EC2) allow servers and instances to be created and scaled almost instantly.  RoadMap GPS also supports “Cloud to Go” users who need to work offline while traveling and then sync their work back to the Cloud.

A Global Track RecordOSAKA

RoadMap has established a global track record as a leader in helping clients forecast accurately in the Americas, Europe and throughout Asia. RoadMap GPS is available in English and in Japanese versions. Our Japanese website www.roadmapjapan.com also has complete information about RoadMap GPS.

BigDataThe RoadMap Advantage: Transforming Big Data into Business Intelligence

RoadMap GPS can analyze millions of transactions at the individual consumer level,such as prescription data, in a few minutes, delivering powerful and accurate forecasts. RoadMap GPS databases and Geneva forecasting engine can also be extended with the R Programming Language to build custom forecasting system using any available R package.

Award Winning Forecasting Technology

RoadMap GPS features the award winning Geneva Forecasting Engine, the most powerful and accurate forecasting software in the marketplace. Geneva has been implemented at hundreds of enterprises worldwide resulting in inventory savings of more than $1 Billion.

RoadMap GPS 2014 Product Summary

Forecasting Software, Big Data Predictive Analytics

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