Last Updated: August 18, 2023
Firstly, is there a need?
Is there increased pain, or opportunity for your forecasting, planning, and strategy to incorporate economic intelligence? Let’s talk about market volatility for a moment. Businesses are being rocked by economic uncertainty such as banking pressures, recession fears, COVID, inflation, wages, supply chain disruption, material costs, employment, import tariffs, and others.
What are the economic contributors to your business? To be more precise what are the economic contributors to your different layers of business, whether by brand, product, or geography? Also, are you looking to plan for demand or cost, or even price?
Well let’s be honest, industry and commerce have been on a roller coaster for over 3 years now, facing significant market volatility due to the pandemic, due to economic uncertainty, climate change, shifting energy demand, and high-impact government and trade policies. Economic indicators such as Inflation, consumer spending, wage increases, cost of materials, stimulus impact, and supply chain bottlenecks are just a selection of external dynamics that are causing upturns and downturns in businesses around the world.
Economists, politicians, and business leaders alike are attempting to make sense of the current market drivers, trying to determine if and how much impact they will have on their lines of business. So yes it is now imperative that businesses understand external market forces, be able to quantify and predict their impact, and incorporate them in some way into regular planning cycles.
We already have a CPM and other planning tools in place
Your organization likely has a well-established planning and CPM or EPM system like Oracle Hyperion, Anaplan, SAP, or Workday. These applications and technologies are comprehensive and offer a broad range of capabilities including sales forecasting, demand management, S&OP, and workforce planning.
What they ALL lack, however, is a layer of contextual economic intelligence that is now fundamental to planners and forecasters, intelligence that is able to verify, validate and optimize many planning activities and decisions.
Easy, just add a new layer of intel
Without sounding biased in any way, Prevedere is the market-leading provider of global data, predictive AI, and economist services that can add that intelligence layer. Prevedere’s Advanced Predictive Planning (APP) solution is able to augment and extend your planning activities and can permanently remove those market blind spots caused by economic volatility.
How is that done?
It starts with data, as all planning and analytics systems do. The sources for planning and the building of forecast models can be broadly categorized as internal and external data. Internal data sources that are leveraged for (let’s call it) traditional planning, have been used for decades, and include historical sales, trends for seasonality, past pricing and promotional activity, and histories of other cost and supply side performance.
Let’s come back to external data in a moment, but consider the next step of traditional planning and forecasting, which is leveraging the CPM (and EPM, ERP) systems previously mentioned to build forecasting models. These are used as a basis for many strategic planning and forecasting activities, managed by a variety of business professionals, from the board, to office of the CFO, to FP&A, to demand planners, purchasing and procurement, sales and marketing to supply chain management. This is all good, especially in a stable economy, but remember that the forecast data used in all these activities is more internally focused, and is not based or validated by external market dynamics – you know, the things that businesses have no real control over, like GDP, inflation, imports/exports, industry trends, consumer behavior, cost of oil, government policy and so on.
This is where Prevedere can easily be layered and integrated into the planning process. Our platform includes a global data repository with millions of model-ready economic, industry and consumer indicators from thousands of data sources. We perform correlation analysis to identify which external drivers or indicators impact your lines of business and leverage those indicators to build econometric models using our predictive AI engine.
How do we leverage this new layer?
The results are highly accurate baseline forecasts and scenarios which are combined with your internal forecasts to create what are known as consensus forecasts. Some of our customers, especially CPGs, start with Prevedere’s forecast as the first step of their planning process, whereas others create a consensus and compare Prevedere’s forecast to their internal version and then make adjustments. This can be an eye-opening process, as organizations learn the real drivers of their business, and how to optimize predictions and plans accordingly.
Market validation, not blind spots
Critically, the outcome for your organization is that many of your planning activities need to be validated with economic-based forecasts, as well as market insights from Prevedere’s on-staff economists who can provide cause and effect interpretation of the data for your exclusive benefit.
The bottom line here is that by extending your CPM and planning systems with Prevedere, we help you make better planning decisions by providing personalized economic predictions for your industry, your channels, and your products. Business leaders can use these insights to optimize plans and to challenge or defend long-held assumptions when planning for the future.
And perhaps the lesson learned from COVID and continued uncertainty is not to be blindsided by market and industry volatility. Go ahead, identify, quantify and incorporate economic uncertainty into your planning processes, so you can mitigate risk, maximize growth opportunity, and get a step ahead of competitors too.
Thank you very much for your time today.
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Suggestion:
Is your strategy considering the macroeconomic factors that impact your business?