Academic journal article The Journal of Business Forecasting Methods & Systems

A Role for the Forecasting Function

Academic journal article The Journal of Business Forecasting Methods & Systems

A Role for the Forecasting Function

Article excerpt

Forecasts have become the base for decisions and action plans ... forecasting function is guided by the forecasting philosophy, which is, consumption drives shipments, the marketplace is dynamic, forecast assumptions are important and one forecast links all planning activities across departments... management should know the forecasts as well as the factors that will drive them.

Duracell, a division of Gillette, is the world's leading alkaline battery manufacturer with the highest USA market share. Our USA product line includes alkaline major cells, lithium photo batteries, hearing aid batteries, high powered rechargeable pack batteries (e.g., camcorder & wireless phone) and specialty batteries. We are a CPG (consumer packaged goods) company with a component product dependent on the use of devices such as toys, flashlights, pagers and radios.

UPSURGE IN MASS

CUSTOMIZATION OF PRODUCTS

Our core business is Alkaline Major Cells. These are Duracell's D, C, AA, 9 volt and AAA batteries you find in stores. The five standard battery sizes are built into thousands of skus to ship our customers every month. Consider more than 20 basic pack sizes such as common AA cell 2 packs, 4 packs, 8 packs, 12 packs and special 20 cell size packs for the warehouse club channel. These pack types go into various types of shipping cartons and trays creating over 80 open stock skus.

We also produce more than 50 standard types of prepackaged displays, mostly to support incremental retail locations. The displays can ship using a variety of promotions including standard, seasonal and custom consumer marketing messages/ offers. Our sales force works with retailers to optimize their return on these incremental displays using customized promotional offers and different product assortments. This creates thousands of different shipping skus each month. The compromise reached in our Supply Chain Management system was to forecast packs and components in these prepackaged displays.

Marketing and sales has effectively turned five basic batteries into thousands of skus to meet customer requirements. This has boosted our sales volume. Before this mass customization, our sales were significantly less than the current level. In this article, we will discuss the role forecasting plays regarding the core five batteries and their thousands of skus.

OUR CUSTOMERS

Most of our batteries are sold at the retail outlets. It is difficult to find a retail outlet where batteries are not sold. Our distribution includes Grocery stores, Drug stores, Mass Merchants, Warehouse Clubs, Hardware stores, Home Centers, Electronics shops, Convenience stores, Variety stores, and many other trade channels. As the market leader since the eighties, we have close to one hundred percent distribution penetration for our product line.

OUR FORECASTERS

Market and sales forecasting is a process which entails predicting consumer behavior, understanding channel activities, the competitive environment and, above all, our products. Our forecasters are reasonably comfortable making decisions with limited information. We have found for a forecaster to be successful, the person should have good presentation, analytical and interpersonal skills. Our department currently has six people and reports to Finance. A forecasting background is not necessarily the key to success. Our staff has worked in previous positions as a government economist, product manager, CPA, production engineer and sales analyst.

FORECASTING MISSION

Our official mission is: "To provide a reasonable base, in the form of a forecast, upon which strategies and goals can be established." Basically, we are a decision tool for management. We forecast shipments and quantify factors that affect the marketplace. This includes quantifying promotional activities, competitive actions, price elasticities, changes in retail channels, battery powered devices and impact of economic conditions. …

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