Forecasting Strategy and Implementation

Business Issue:

Historically, all forecasting and purchasing activities had been based on revenue projections and were done independently (i.e., Operations provided revenue estimates to Management, and Purchasing re-created this information to use in establishing supplier relationships). This division of an Energy-sector product and services supplier needed to identify ways to improve operational effectiveness. The project team recommended a global, integrated, product-usage based forecast to eliminate redundant activity, improve product availability, and leverage global consumption volumes with suppliers to obtain lower unit costs.

Actions:

• Implemented a global, product-based forecasting tool to predict product consumption for top 35 products representing 80% of product spend across all regions; features include:
  • Options for data capture based on revenue, rig-specific or geography
  • Automated consolidation and rollup
  • Global view of product consumption for upcoming 12 months
• Defined the information sharing approach, allowing information to be updated quarterly and shared with Purchasing
• Enabled forecasting to be used in annual negotiations with suppliers, improving availability and reducing unit costs

Results:

• Annual savings estimated to be $3M to $5M