Are rolling forecasts right for my company?
There are a range of factors that will influence the decision of whether fixed period or rolling forecasts are appropriate for your organization. Consider the following:
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
1. Type of industry. Your company's industry or specific product lines will inform the periodicity of your forecast. If your company builds airplanes or ships, your rolling forecast periodicity would be measured in months or even years, in which case a fixed forecast may be appropriate. On the other hand, Fast-Moving Consumer Goods industries might use a daily rolling forecast.
2. Organizational inertia. If your organization's business workflow processes, operational practices and decision-making processes need long lead time due to product complexity or risk profile, having a constantly changing high frequency rolling forecast might be counterproductive. Aligning the periodicity of your forecast interval to the ability of your organization to respond to forecast change is a key consideration. On the other hand, if your organization is truly agile, with short and responsive procurement or fulfillment lead times and efficient management decision-making processes, a rolling forecast could prove valuable.
3. Logistics agility. If your organization's logistics, fulfillment or supply processes and service providers are able to meet short-term demand volatility, rolling forecasts would be useful to provide regular and timely updates on your expected demand to those in your supply chain. This could help you negotiate better pricing arrangements with key suppliers.
4. High opportunity or penalty cost. If your client contracts mandate very specific service levels with large penalties for breaches, it is most likely in your best interest to implement a rolling forecast regimen. Similarly, if there is a high opportunity cost associated with poor inventory or resource planning, a rolling forecast might be more relevant than a fixed period forecast, especially in a volatile environment.
5. Decision-making efficiency. How efficient or effective is your organization at responding to and resolving forecast variances? If you have to wait for a monthly planning meeting to get approval to manage variances, running a weekly rolling forecast would probably not be called for.
It's important to note that the ultimate decision whether to run rolling or fixed period forecasts might not be either/or. If your organization has efficient BP&F processes, the additional effort required to run both types of forecasts might not be significant, in which case, running a rolling forecast alongside a fixed forecast could help balance "big picture" demands while ensuring significant short-term demands are not overlooked.
About the author:
Rob Livingstone is a former CIO with over three decades of experience in the corporate world. In addition to running his IT advisory practice, he is an author and commentator, providing authoritative, independent insights on a range of IT topics including emerging technologies, governance and IT security. Rob is the author of the book Navigating through the Cloud and is also a Fellow at the University of Technology, Sydney, Australia, where he teaches leadership, strategy and innovation in the school’s flagship MBITM program. Visit Rob at www.rob-livingstone.com or email him at firstname.lastname@example.org.
Dig Deeper on Corporate Performance Management Software
Related Q&A from Rob Livingstone
The mobile payment market is experiencing tremendous growth. Get ready to think about cyberthreats, changing operations and opportunity.continue reading
With cyberattacks a growing concern for many companies, the CFO must take a leadership role in securing organizational and customer data. Here's how ...continue reading
Today's CFO needs to have a good grasp on nonfinancial data, says one expert. Here's why expanding your knowledge base beyond finance-driven ...continue reading
Have a question for an expert?
Please add a title for your question
Get answers from a TechTarget expert on whatever's puzzling you.