CPG
Is Historical Planning a
Thing of the Past?
The past two years have
been uniquely difficult for
most consumer packaged
goods companies. The economy and poor consumer
confidence have made even
the best-managed, best-run
companies feel like they
were on a sinking ship. An
issue for most companies as
the economy recovers is
what to do with the historical data from those bad
times going forward. How
can companies budget, forecast and plan their business
when the historical data is
approximately worthless?
—Bruce Tompkins, executive director
of Tompkins Supply Chain Consortium
he answer to all questions about data from the last two years and
how it should be used is: It depends. Since historical information
is used for a variety of purposes, companies need to look at each
case and make a decision as to whether or not the data holds any
promise for helping understand the present. In the end, some may decide that
the information is completely without value.
A survey recently completed by the Tompkins Supply Chain Consortium
examines the topic of uncertainty and many of the survey findings apply to
the discussion at hand. First, the survey found that supply chain leaders are
more uncertain about the future right now than they were one or two years
ago. The primary reason for this is leaders know that the last two years were
an anomaly, and therefore, the path forward is a mystery. All the mathematical models in the world cannot make the historical data of the last two years
add up to predict the future.
The survey also found that the most uncertainty exists in the area of planning, followed by sourcing and sales and customer service. Companies are
uncertain about the output from their planning models. They are concerned
about to whom and how they are sourcing products. And they are uncertain
about sales volumes. All of these uncertainties point to a lack of historical
information that is usually relied upon to predict the future. For supply chain
personnel, this is a huge challenge, as the very foundations of an efficient
supply chain are predictability and standardized processes, which lead to
sound execution.
Looking at the role that historical data plays in areas such as budgeting, forecasting, business and financial planning, inventory management, manufacturing, sourcing, and sales and marketing, companies have to be concerned with
how to develop an accurate forecast.
T
The Outlook
If using historical data for future planning is not the answer, what is? There are
only two ways to fix this problem in 2011. One way is to become less dependent on historical data and get closer to the consumer. Through a closer relationship with the consumer, companies can obtain real-time demand information,
as well as a better understanding of how to move forward with planning. The
second requirement is to become highly flexible while remaining efficient so
that reacting to changes becomes the rule and not the exception.
