Forecasting Benchmark Study 2013

Now in its fourth year, this remains the most comprehensive study of demand planning performance, including virtually all items and locations of the North American warehousedelivered business for eleven multinational consumer packaged goods companies. The scope encompasses 500 distribution centers, 450,000 item-locations, close to 5 billion physical cases and more than $130 billion in annual sales.

Executive Summary

It was an interesting year for forecasting. As the economy continued to recover in North America, supply chains became considerably more complex while shipments for the group as a whole remained essentially flat. One would have hoped for just the opposite – rising volume and a stable or decreasing level of complexity. Proliferation of items, base codes and locations grew by up to 10% in 2012 for the group, but differed significantly between companies. Non-food companies drove much of the complexity, with the growth in non-food itemlocations since 2009 outpacing the growth in food item-locations by a factor of 10. There was also a pronounced upswing in the number of seasonal items, which rose almost 20% in 2012, compared to only 5% for non-seasonal items.

Complexity from innovation reversed a threeyear trend of improved forecast value-added, which dropped slightly in 2012. Average weekly forecast error also dipped slightly, from 53% in 2011 to 51% in 2012. However, the spread between figures for top performing companies and the average narrowed for both forecast value-added and error, highlighting a growing challenge to predict demand in fast-moving markets. Bias for the group remained unchanged at 7%, with the consumer packaged goods industry consistently over-forecasting for every year encompassed in the study. Increased reliance on promotions and new products drove sales, but made forecasting and execution more challenging, with elevated error levels and bias 4–5X higher than regular sales.

Throughout this changing environment, Demand Sensing continues to provide consistent value across all velocities and business activities, including new products, promotions, seasonal and regular turn volume. This highlights the importance of new mathematics that automatically adapts to changing market conditions, whether the economy is experiencing a downturn or a recovery.

The study’s findings have resulted in a number of tangible initiatives at member companies and we are encouraged to see the report being widely distributed throughout the industry. We hope you find the study helpful in your pursuit of forecast excellence.

By Robert F. Byrne, Chief Executive Officer Terra Technology

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