Answers to Your Forecasting Questions

[Q ] What is the difference in a demand planner's role when working for a distributor as opposed to working for a manufacturer? Also, from a job perspective, which one is better?[ A ] There is not much difference between the two. In each case, the demand planner has to forecastand manage the demand.To balance supply and demand, the demand planner, in each case, needs to do demand sensing and demand shaping. Although demand planners of distribution and manufacturing companies operate from a different hierarchy of supply chain, their eyes are mostly focused on the end-consumers, because in the end what matters is how much consumers are pulling. Gone are the days when markets were supply-driven, and when manufacturers and distributors influenced their customer demand by offering one incentive or another. They have realized now that building inventory at the customer level won't help if the end-consumers are not buying. So, what is needed is to influence the demand of end-consumers (not customers). As for the job perspective, I am not sure which one is better. I imagine each one has to be paid a competitive salary to keep the demand planner on board.[Q ] Our company is currently paying more attention to the operational planning than to the strategic planning. Over the last 10 years or so, it has trimmed down significantly the strategic planning staff, and expanded the operational planning staff. Is this a good strategy? Don't you think what is most important is to hit the long-term target?[A] Both are important. We cannot achieve our long-term target without an operational plan. Keep in mind: we don't have perfect knowledge. We cannot develop a plan about promotions, the number of new products to be launched, and a pricing strategy that can guarantee we will hit our strategic target, which may be one year away. Although we don't have perfect knowledge, we are not completely ignorant either. We have partial knowledge. We know something, though not precisely, about how an increase or decrease in promotion, price, and number of products launched affect sales.Therefore, it is betterto prepare an operational plan, say, of next month, which is consistent with our strategic goal, and then implement it. If it does not produce the result expected, we have the opportunity to re-plan it for the following month. This way we keep on planning and re-planning. By doing this, we have a better chance of hitting our strategic goal.[ Q ] lam from the academia. I want to know if judgment adds any real value to a forecast. We often see judgment as a way of biasing the forecast.[A] On the surface, it appears that judgment adds a bias to a forecast. But, unbiased judgmental overlay over statistical forecasts from people with a domain knowledge helps. …