Good Forecasting Matters

April 5, 2010
5:10 am

The shift happened. Haiti crumbled. Chile did far better. The difference was substantial. The contrast offers lessons on how to shelter cities from future devastating earthquakes.
In a similar vein, the Great Recession shook the core of value chains. Some supply chains crumbled and some weathered the storm. What made the difference? It is this story that I want to tell.

The Great Recession

In my lifetime, there has never been one quite like it. October 2008 shook the foundations of business in a way that I had not seen before. It is the longest recession of my lifetime.

As credit tightened, supplier relationships crumbled. Inventory ballooned and factories ceased production. The forecaster was in the hot seat to answer the question of “when will it be over?” All in all, a very scary time .

Not all were Equal to the Challenge

During this period, I interviewed 28 Fortune 500 companies to understand how long it took them to sense the true shift in demand and how long it took to align their supply chain for the recessionary shocks. The differences were striking.

Who did it well?

Cisco did it the best. Burned in the dot.com downturn with inventory write-offs of 2.5 billion, Cisco had taken action to redesign the supply chain to better sense and translate demand. They sensed the downturn in the first month and had aligned the extended supply chain within 6 weeks. Their management team understood the importance and acted. However, for most it was a VERY different story.

Leaders sensed the downturn 5X faster and had more quickly aligned the supply chain response. The interesting fact for me was the capability to sense and translate demand had less to do with technology adoption –the type of system and how it was installed–than attitude and capabilities. Leaders had the right stuff. They did three things differently:
Forecast was True North: Over 80% of companies have implemented supply chain forecasting systems; but, very few have a signal that is true north. True north is a forward-looking compass set on true market demand. Companies with inherent forecast bias were challenged; and companies dependent on sales forecasts were crippled. The companies that did the best were outward-focused using true market indicators and modeling what-if scenarios based on market drivers. Forecast models based on orders and shipments were simply not equal to the task.
Outside-in Focus: Companies that modeled ship-to locations based on selling units out performed. For most this was too HIGH of a bar. Why? Over 80% of forecasting systems are built with tight integration to ERP using ship-from locations (distribution warehouses) as opposed to ship-to (channel locations); and modeling is based on the manufacturing unit, which can be VERY diferent than the selling unit. Likewise, companies that out-performed had replaced rules-based consumption in Distribution Requirements Planning (DRP) with daily statistical modeling using channel demand to calculate required inventories.
Forecast Discipline: The companies that did it well were good at forecasting. They had process discipline: few managerial overrides and when overrides occurred, they held people accountable for bias and accuracy. These companies had experienced forecasters behind the wheel (as opposed to the new kid just hired from a MBA program), their forecasters knew their products and the market, and they excelled in what if analysis and the ability to use modeling programs.

Forecasting Matters

Yes my friends, it is not the system, it is how you use it. It should be a wake-up call for all. Forecasting matters. It will matter even more as we come out of the recession. Case studies are happening right now that will soon be on the front page of the Wall Street Journal.
What do you think makes a difference? Any stories to share?

Navigating Supply Chain Economic Downturns

August 30, 2026 5:28 pm

In 2007, the average company took six months to sense market shifts and adapt its supply chain. My estimate, based on work with clients, is that if a downturn happened today, the average company would take 20-30% more time to adjust than in 2007. Here I give insights on preparedness.

Warning: Sidestep the Narrative of the Misguided Goldiggers

August 10, 2026 4:58 pm

Ten years ago, I started writing a book titled Stories of the Misguided Gold Diggers. The book was a collection of stories from two decades of stories of technology leaders perpetuating the myth of integrated end-to-end supply chain planning.

I dusted off the manuscript on Saturday. I think that we have a new chapter. Companies focused on putting Artificial Intelligence (AI) on top of existing architectures are putting AI Stupid on steroids.

The Myth of End-to-End Planning

July 31, 2026 9:14 pm

Supply chain planning, supply management, supply chain execution, network design, and transportation/logistics management operate in silos. Not much has changed over four decades. The connections flow back through transactional systems: order-to-cash and procure-to-pay. There is a myth that companies can buy an end-to-end supply chain management solution. This is largely a myth. Here we explain.

Lead Time: A Broken Gossamer

July 16, 2026 6:38 pm

If you are struggling with supply chain planning, dancing in the light of shiny objects, and scratching your head, please read on. My goal is to help you.

Please do not AI Stupid. What do I mean? AI Stupid is putting agents and agentics on top of existing architectures believing that making them faster and hands free add value. To me, this is fools play.

I love AI. I am excited about new technologies. To this end, I want to shine a light on how new technologies can help address the black holes and inconsistencies in today’s supply chain, which largely stem from the limitations of the first generation of supply chain planning and execution technologies. In this blog, I give you three places to start.

Do You Need a Supply Chain Coach?

July 9, 2026 5:27 pm

Supply chain is where the rubber hits the road. For a public company, over 40% of market capitalization is tied to the trade-offs between growth, operating margin, inventory management, and Return on Capital Employed.

The road for supply chain improvement is fraught with issues. Here we share some and offer some advice.

Is your Supply Chain AI Ready?

June 11, 2026 2:39 pm

A simple quiz to assess an organization’s AI readiness.

The pace of change is fast and furious. Every day, technology advances faster than we can digest. A great challenge to have.

Determining whether a supply chain is “AI-ready” is less about technology and more about the gray matter between the ears of supply chain leaders. Leadership, alignment, and clarity of goals matter.

Too few companies are clear on the definition of supply chain excellence. Measuring and rewarding functional metrics reduces the firm’s value. Putting agentics on top of today’s processes can make bad practices run faster, reducing value.

The toughest job for the supply chain leader is challenging existing supply chain paradigms that were defined by the limitations of decades of supply chain technologies. As the curtain lifts on the potential of new forms of technology, process redefinition is our opportunity, but only if we are clear on what drives value. (Here, I link to the Supply Chains to Admire reports to help you define value. The next report will be published on June 23rd, along with my Dynamic Benchmarking Product, to help you define value in the face of your AI readiness. More information about the launch is at the bottom of this blog.)

Supply Chain Shaman