Predicting consumer demand has become a nightmare for CEOs. That makes this exactly the right time for CIOs to help their companies get a better grip on real-time sales.
Predicting consumer demand has become a nightmare for CEOs. That makes this exactly the right time for CIOs to help their companies get a better grip on real-time sales.The subject of tracking demand is the focus of InformationWeek's cover story, which explores how companies are doing much more to analyze weekly and even daily point-of-sale data to better understand what's selling where, in part to avoid problems such as stock-outs or inventory build up.
Companies have been doing variations of this for awhile, most notably Wal-Mart providing sales data to its suppliers. But technology and process changes are making it more valuable and practical. Data warehouse technology is more powerful and affordable, for example. And the analytical tools have improved, writes Doug Henschen, who's editor in chief of the Web site Intelligent Enterprise:
With easier-to-use business intelligence tools, manufacturers and retailers are pushing analytic tools into the hands of front-line decision makers, most often field sales and marketing people involved in planning, merchandising, and supply chain management.
The Economist looks at the issue of forecasts in an article this week as well. It notes that "the struggle to produce accurate forecasts" is the No. 1 worry of CFOs right now, citing a CFO Europe survey of 1,300 CFOs by Tilburge University. The Economist suggests some broad organizational approaches to budgeting and forecasting, including scenario planning that lays out contingency plans for a range of outcomes:
[Danish toymaker] Lego has also been using a monthly meeting of senior managers, known as the operations board, to pool knowledge of what is happening in its various markets. At each get-together, the firm's executives not only discuss what has been going on that month, but also make their best guess about what is likely to happen in the 12 months to come.
With CEOs and CFOs fretting about forecasts, CIOs are missing an opportunity if they don't have some of their IT talent working on this problem. This trend is playing out most dramatically in consumer goods and retail, but IT teams in every industry should be trying to get a better grip on real-time demand.
Intel, Costco, and a few other companies have given up trying to forecast their financial results the rest of the year, citing the economic uncertainty. Best Buy's CEO has called the drop in consumer demand since last September "seismic." Whether demand moves further down or edges back up in the months head, it's safe to assume the quakes haven't ended.
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