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Hi-Tech Transportation

by Gail Dutton

World Trade Magazine

May 2, 2011

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Transportation also is improving by the use of advanced forecasting methods. Procter & Gamble, for instance, is using new demand forecasting approaches to improve its manufacturing and logistics operations. It is at the forefront of a new type of forecasting, Rob Byrne, CEO of Terra Technology, points out.

Like traditional forecasting models, the new method incorporates historical trends. But, it also includes downstream data that reflects current conditions. Modern forecasting methods, Byrne says, “look at what’s happening in business right now, including recent shipments, current inventory, sales, and the ability of a given store to move certain kinds of goods.”

“Forecasts are made every day at Procter & Gamble for about 90 percent of its items sold outside Asia,” Byrne recounts. “It’s not possible to review everything,” he emphasizes, so automation makes sense. For Procter & Gamble, “We run Demand Sensing at night with that day’s information, and publish it automatically,” Byrne explains. That way, the company gets actionable results quickly without the extra cost of human involvement.

Byrne says that some clients have reduced forecasting errors by 50 percent but, “to get those benefits, you have to accept the recommended actions. You have to execute against the forecast,” he emphasizes. That implies trusting the forecast more than “gut instinct,” and being willing to forego business as usual and to actually use the forecasts.

Advanced demand forecasts are also being used to predict logistics requirements in advance of orders. Having accurate transportation forecasts makes transportation buys more accurate and helps organizations better allocate resources to fit their current freight needs. The advanced forecasts allow analysts to predict freight daily, by lane, load, temperature and class, providing granularity.

Getting the most from forecasting also requires some degree of synchronization throughout the company and the supply chain regarding such details as item numbers, definitions, type of units (for example, barrels or gallons, metric or English). “It’s important to get everyone on the same page,” he adds. Then, they can begin to find efficiencies that reverberate throughout the supply chain, including transportation.