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Forecasting Organization

Some roots for lack of accuracy and satisfaction can be found in the way forecasting
is organized in an enterprise.

In today’s companies the bulk of forecasting activities
is conducted by the marketing department. But often different stakeholders within marketing (e.g. portfolio manager, product management, therapeutic area head etc.) are conducting independent forecasts for the same product or product line. Other departments might also work on forecasts for that product, employing their respective techniques and level of detail (e.g. sales department and finance on product line level, production on SKU level and logistics looking at SKUL.

A decentralized organization proves to be ineffective due to several reasons:

On the one hand forecasts with the same goals are produced more then once leading to multiple spending and decreased overall efficiency. On the other hand the harmonization of goals and assumptions (e.g. market size, competitive environment, compliance, price development etc.) as well as methods and tools across forecasts is neglected or only partially achieved. The latter aspect leads confusion in forecast users due to multiple forecasts that produce different results and poses a barrier of higher level consolidation.
Forecasting Organisation

Forecasting Organization

Depending on the company’s current situation
and preference, two solutions should be considered to address the issue.The more radical solution is the creation of a dedicated forecasting unit in the company that produces all forecasts.

Such a dedicated forecasting unit will be more successful in harmonizing basic assumptions, data underlying the forecasts as well as regarding all requirements (level of forecast, horizon, key business values etc.) that forecast users might have. It will employ a single forecasting process that can be frequently reviewed and improved. Corporate reward systems can be applied and tied to the performance of this group, raising motivation for better forecasting. The problem of multiple forecasts that produce different results will definitely be eliminated.

An alternative step to improvement is the
establishment of a standardized forecast process
that has to be followed by all departments that
are producing forecasts.

Coordination efforts between the participating departments are organized in an operational team that meets regularly to discuss and decide upon forecast needs, data sources, techniques, process reviews and improvements.
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