The Institute of Business Forecasting's FVA blog series continued in January, with my interview of Shaun Snapp, founder and editor of SCM Focus.
Some of Shaun's answers surprised me, for example, that he doesn't compare performance to a naïve model (which I see as the most fundamental FVA comparison). But he went on to explain that his consulting mainly involves software implementation and tuning (often with SAP). His work stops once they system is up and generating a forecast, so he is generally not involved directly with the planners or the forecasting process.
Shaun notes that most of the companies he works with don't rely on the statistical forecast generated by their software -- that planners have free reign to adjust the forecasts. And yet, because it takes effort to track the value of their forecast adjustments, it doesn't get done (planners are too busy making all their adjustments to step back and measure their own impact!).
He also notes that most of his work is focused on technical system issues -- he's found little demand for forecast input testing or other FVA-related services he can provide.
Discouragingly, he states he's never found a forecasting group that based its design on FVA. While clients may be receptive to the basic idea -- of applying a scientific approach to evaluating forecasting performance -- there are actually some groups where FVA is contrary to their interests. He gives the example of a sales group whose main interest is for the company to maintain an in-stock position on all their items. They have a lot of power within the company, and can achieve their objective by biasing the forecast high, thus forcing the supply chain to maintain excess inventory.
Read the full Shaun Snapp interview, and others in the FVA series, at www.demand-planning.com.
Coming in February: Interview with Steve Morlidge of CatchBull
Steve has been subject of several previous BFD blog posts, exploring his groundbreaking work on the "avoidability" of forecast error (Part 1 of 4), forecast quality in the supply chain (Part 1 of 2), and a Q&A on his research (Part 1 of 4). He also delivered a Foresight/SAS Webinar "Avoidability of Forecast Error" that is available for on-demand review. Check the IBF blog site later this month for Steve's FVA interview.
