Forecasting is everything in Supply Chain Management. Organizations can't serve their customers, meet their goals, or even keep the lights on without looking ahead and planning accordingly. Supply forecasting, for example, helps organizations determine how and when they'll receive the products and components they need. Demand forecasting helps them distribute their own products effectively and avoid getting bogged down in uncertainty and excess inventory.
Organizations in certain regions and industries depend on forecasts of a more literal sort. Extreme weather - an increasingly common issue - wreaks havoc on shipping lanes and supply networks every year. As natural disasters become more frequent and more destructive, Procurement professionals are hard at work identifying solutions and strategies that will make it possible to accurately predict such risk factors.
Procurement Must Become PredictiveUnsurprisingly, Deloitte's latest CPO survey found that Procurement teams are uneasy heading into a new decade. The list of risks facing the function includes new entries like "economic downturn" and "trade war" as well as perennial challenges related to internal complexity and digital fragmentation.
Even early adopters are struggling. 81% of organizations who've fully adopted digital Procurement technologies are still unsatisfied with their ability to address risks across their supply base. This suggests that perhaps organizations have put too much faith in their tools, implementing new technology without effectively training their teams and providing for quick adoption.
On paper at least, CPOs are committed to closing the analytical skills gap to make more predictive, accurate forecasting a reality. 43% identified "predictive analytics" as their primary focus when it comes to nurturing digital skills in the next twelve months. They've got a long road ahead. Digital skills gaps like this one are widely acknowledged as perhaps the most pressing challenge facing today's Procurement teams. As markets grow increasingly volatile, technology grows increasingly mature, and consumers grow increasingly discerning, they'll need to close these gaps both quickly and definitively.
Consumers Want Action, Not Forecasts
Procurement teams that fail to make accurate forecasts and take proactive action also run the risk of alienating consumers who have grown increasingly conscious of supply chain ethics and environmental responsibility. There is little patience for organizations that drag their feet on topics like climate change and human rights. Even companies like Amazon - who recently made ambitious promises to leverage electric vehicles and address deforestation - have seen consumers express cynicism and disdain. Just a day after that announcement, Amazon saw thousands of its workers take to the street for the Global Climate March. Many held signs with slogans like, "Good start, Jeff." The message is clear: forecasts and predictions won't cut it anymore.
Even more proactive organizations have learned that forecasts can be a double-edged sword. In October, both Nestle and Procter & Gamble announced that they would fail to meet many of the goals they set at the start of the decade. Both consumer products giants promised to fully eliminate deforestation across their global supply chains before 2020. Though both made considerable progress thanks to visibility-boosting technology, they will enter the new decade with work to do.
Sweeping promises have become de rigueur for businesses hoping to win over customers and stand on the right side of important issues. P&G and Nestle, however, present a cautionary tale. Organizations that can't live up to their promises, can't make their forecasts a reality, run the risk of disappointing their customers and even damaging their reputations. It's possible that organizations will think more carefully before revealing the details of their forecasts and action plans.