S&OP: Adjust your Baseline to reach Consensus

You need better forecasting, but there are two levels to it.

1) Your baseline forecasting engine.

2) And your consensus engine.

We explored quite a lot in this series. Be it statistical forecasts, machine learning, or the newest transformer models, all help to build a baseline forecast based on your sales history.

Is that enough?

Definitely not!

The omni-channel world is driven by campaigns, launches, and much more. For that, you need inputs. These inputs need to come from the sales & marketing team.

How do we measure the success of those inputs?

Well, it's actually pretty simple:

Let me introduce you to Forecast Value Added.

First, we have measured how good our baseline forecast (1) is compared to our status quo. Here, you should have a double-digit improvement throughout all your SKUs.

Now, after we’ve run the forecast, it’s time to gather input from other team members.

Your sales team, your marketing team, and your key accounts should now be able to give their inputs to the demand plan. These team members have great information about upcoming demand spikes and can help drive supply chain success.

After their inputs, the S&OP lead should be able to accept/reject or discuss those adjustments and then drive the consensus forecast.

This then drives the supply plan.

In a perfect world, both improve over time; thus, the inventory metrics, lost revenue, and cash flow efficiency improve.

Not only do your stockouts go away, but you can improve your supply chain efficiency and reduce S&OP alignment time.

Key learning today: Adjust your baseline engine and drive consensus. But - also get better at your baseline engine (good tech can help).

See you soon!
-Leon

P.S. I first learned about this concept from Nicolas Vandeput, a supply chain scientist and author of amazing books such as Inventory Optimization.