Part 1 – Introduction and Overview
Welcome to our four-part educational series focused on the fast-emerging practice known as Intelligent Forecasting. By the end of this short series, you will have an understanding and appreciation of what it is, why organizations employ it, who benefits, where it impacts your business, and ultimately how you can positively change your future!
We will also present several What-If questions along the way, which will pose real challenges to any discerning executive or strategic planner who is trying to predict and plan for future business outcomes, whether mitigating risk, maximizing opportunity, or streamlining operations. For example:
The Rise of Intelligent Business
Several ‘Intelligent’ related terms are appearing within industry and commerce, examples being The Intelligent Enterprise, Intelligent Forecasting or The Intelligent Supply Chain. The key word ‘Intelligent’ and common thread is the transformation of organizations to digital practices, and the adoption of the latest technologies that turn data into insights and into action across the business. The intelligent enterprise leverages emerging technologies such as artificial intelligence (AI), machine learning (ML), IoT, and advanced analytics to enable the workforce to focus on higher-value outcomes. CFOs and CEOs are actively looking for ways they can drive a successful digital transformation journey and become a truly data-driven intelligent enterprise.
Forecasting Gets Intelligent
Intelligent Forecasting fits within this transformational shift and enables executives, strategic planners, and management to take advantage of the very latest AI technologies, big data, and predictive analytics to not only create highly accurate forecasts but to foresee future business headwinds and tailwinds. Intelligent forecasters will also be able to foresee future demand softening and upticks before competitors, able to respond ahead of the game. Our company (Prevedere) realized several years ago that traditional forecasting was limited, and only provided planning accuracy when the supply chain, economy, and the world was stable. External events and forces play an increasingly important role on markets and company performance, and absolutely need to be factored into business planning. Intelligent forecasting incorporates external volatility by ingesting external data feeds into prediction models, whether at company, division, brand, or segment levels.
1 + 1 = 3. Internal + Economic Forecasting Models
One of the key deliverables of Intelligent Forecasting is the creation of economics-based forecast models for your business, that are complementary to your internally generated forecasts. They add strategic value to planning because they are based on the economic drivers of your business. Those drivers are identified via a correlation analysis of millions of external indicators relating to economic trends, consumer behavior, climate/weather impact, geopolitics, energy demand, health crises, trade policy, legislative change, and millions of others. Key functions within your business, for example materials management, capacity planning, logistics, inventory management, all benefit from a demand outlook based on closely related economic drivers.
Also, economic forecasts that are created via econometric modeling techniques have proven to be incredibly accurate predictors of business performance. This provides competitive advantage and planning insight for a range of professionals, including CEOs, CFOs, VPs, GMs, financial analysts, product and category managers, even data analysts and scientists. Intelligent forecasts add a layer of insight on top of your current planning activity that was previously unattainable, now able to provide a more holistic and ultimately reliable view of your future business performance.
Intelligent Forecasting is typically more applicable to broader and more strategic views of your business and markets, as compared to more granular SKU level projections. This is because demand for a single product may come and go at any time for a number of reasons, but overall consumer demand in aggregate is largely dictated by external data trends such as the health of the economy, demographics, consumer sentiment etc. We have found that the economic based prediction is frequently more accurate than the internally generated forecast that is based on historical internal transaction data. With both forecasts in hand, businesses can plan with real confidence and competitive advantage, and continually monitor the impact of external forces on future business.
Conclusion and Further Reading
Intelligent Forecasting is a fascinating practice and is really only now possible thanks to massive computing power, applied machine learning and the availability of time series data from millions of sources. Please note that it can be time consuming to identify, prepare then correlate the many possible external data feeds needed for economic based forecasts (gentle but timely plug for Prevedere, as we have a data repository with over 3 million ready-to-go global data feeds).
We hope that this series will be of interest and value to you. Below is a list of the posts, and also 2 recommended pieces of content that offer executive and high-level insight into this topic.
- Part 1 – Introduction and Overview (this post)
- Part 2 – Who Benefits Most from Intelligent Forecasting
- Part 3 – Which Industries Leverage Intelligent Forecasting
- Part 4 – Data Scientist View of Intelligent Forecasting
- Finale – Conclusions, The Future, How to Get Started
- Thought Leader Roundtable on Intelligent Forecasting
Rich Wagner, Prevedere CEO, sits down with industry thought leaders Doug Laney, Dr. Barry Keating, and Nick Vandesype to discuss advancements in business planning and an introduction to Intelligent Forecasting. LINK
- Forrester Report on Economic Impact of Intelligent Forecasting
Forrester conducted a Total Economic Impact™ study to examine the ROI that enterprises can realize by utilizing Intelligent Forecasting. LINK
Thanks for your time today.
Watch out for Part 2 of the series: “Who Benefits Most from Intelligent Forecasting”.