Terra’s Forecasting Benchmark Study 2012

The Consumer Packaged Goods (CPG) industry faced another year of challenges from economic turbulence and weak consumer confidence in 2011. Given the volatility and rapid pace of promotional activities and product innovation, the gradual increase in forecast error since 2009 comes as no surprise. Demand Planning provides more or less the same performance across companies, with average weekly error rates of 53%. The spread in bias between companies was more pronounced – top performers achieved weekly bias of 3%, less than half the average level of 7%.

Terra’s Forecasting Benchmark Study is a pretty comprehensive survey. It represents over $100 billion in annual sales from nine multinational companies and encompasses one third of all North American CPG volume.


Promotional volume climbed 8%, though North American shipments remained essentially flat, the study shows evidence of a heightened reliance on marketing activities to drive sales

New Products

Innovation in CPG is impressive, with new products accounting for one third of all items in 2011

Shorter PLC

Half the items have less than two years of history; confirming that traditional statistical models lack the basic information to make meaningful forecasts

Forecasting errors

One third of all forecasted volume is subject to extreme error, where sales exceed or fall short of forecasts by two times or more. Extreme error is the most costly and disruptive to the supply chain, risking revenue and customer service, and driving large quantities of excess inventory.

SKU rationalization

Network complexity continues to rise: Far from calls for SKU rationalization, the industry experienced considerable growth in items, especially in low-volume items. There is little evidence that cost pressures are driving much network consolidation.

Demand sensing

Demand Sensing cuts instances of extreme error by more than 50%, significantly reducing the strain placed on supply chains and unexpected costs.

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