performers, though not necessarily top perform-ers in sales forecasting. To understand the varia-tions in sales forecasting management perfor-mance in successful companies, our aim was toinclude firms at various levels of the supplychain, with varying degrees of success in fore-casting sales. The selection process resulted insite visits with 15 manufacturers, three distribu-tion firms, and two retailers: Anheuser-Busch,Becton-Dickinson, Coca-Cola, Colgate Palmolive,Federal Express, Kimberly Clark, Lykes Pasco,Nabisco, JCPenney, Pillsbury, ProSource, ReckittColman, Red Lobster, RJR Tobacco, Sandoz,Schering Plough, Sysco, Tropicana, Warner Lam-bert, and Westwood Squibb.Company analysis began with a request forany documentation of the sales forecasting man-agement process, including reports, system and/or management procedures, and informal proto-cols. Once this information was analyzed, aninterview schedule was arranged with anyone inthe company affiliated with sales forecasting,including developers and users of the sales fore-casts. The taped interviews were conducted on-site by the research team, with two interviewersin each interview to ascertain reliability, and thetranscripts were analyzed for sales forecastingmanagement content.The in-depth, benchmark analysis of these 20companies led to the conclusion that sales fore-casting management can be divided into fourdimensions: Functional Integration, Approach,Systems, and Performance Measurement. Withineach dimension, four stages of effectiveness wereidentified. Using the characteristics of each stagewithin each dimension, it is possible to deriveguidelines to enable companies to progress to~ward a higher level of sophistication for eachforecasting dimension.Ahhough discussed separately, it should bekept in mind that all four dimensions are inextri-cably intertwined, and discussion of one willsometimes refer to aspects of another. Moreover,although we refer to companies
certain stages,it is important to remember that a particular com-pany can be in one stage on a certain dimensionand in a completely different stage on another.Progress in one, however, is usually related toprogress in the others. Finally, no companieswere at Stage 4 on all four dimensions; all hadroom for improvement.
E ffectively managing sales forecastingwhen it comes to Functional Integrationrequires implementing what we callForecasting C *
Communication encompassesall forms of written, verbal, and electronic
action among the functional business areas--marketing, sales, production, finance, and logis-tics (including purchasing). Coordination is theformal structure and required meetings betweentwo or more areas. Collaboration is an orientationamong the areas toward common goal settingand working together. Figure 1 provides a sum-
Figure 1Forecasting Benchmark Stages: Functional Integration
• Major disconnections between marketing, finance, sales, production,logistics, and forecasting• Each area has its own forecasting effort• No accountability between areas for forecast accuracy• Coordination (formal meetings) of marketing, finance, sales, pro-duction, logistics, and forecasting• Forecasting located in certain area (typically operations or market-ing), which dictates forecasts to other areas• Planned consensus meetings, but dominated by operations, finance,or marketing--no real consensus reached• Performance rewards for forecasting personnel only, based on contri-bution to department in which forecasting is housed• Communication and coordination between marketing, finance, sales.production, logistics, and forecasting• Existence of a forecasting champion• Recognition that marketing is a capacity-unconstrained forecast andoperations is a capacity-constrained forecast• Consensus and negotiation process to reconcile marketing andoperations forecasts• Performance rewards for improved forecasting accuracy for all per-sonnel involved in consensus process• Functional integration (collaboration, communication, and coordina-tion) between marketing, finance, sales, production, logistics, andforecasting• Existence of forecasting as a separate functional area• Needs of all areas recognized and met by reconciled marketing andoperations forecastsFinance = annual dollar forecastsSales = quarterly dollar sales-territory-hased forecastsMarketing = annual dollar product-based forecastsProduction = production cycle unit SKU forecastsLogistics = order cycle unit SKUL forecasts• Consensus process recognizes feedback loops (e.g., constrainedcapacity information is provided to sales, marketing, and advertising,which can drive demand)• Multidimensional performance rewards for all personnel involved inconsensus processBenchmarking Sales Forecasting Management q9