The true value of forecast accuracy presents itself when translated into dollar values. Dr. Jain, Editor of the Journal of Business Forecasting, said in one of his interviews that “an average company can save $3.52 mil. for every one-percent improvement in the under-forecasting error, and $1.43 mil. in improving the over-forecasting error.” Many of the technical terms might not catch your attention, but when expressed in millions of dollars, everyone understands what is at stake.
With any software implementation, a business is either looking to save money or make more money. When software can do both, that makes it all the better. Implementation costs and the time it takes to train users are additional costs to buying licensed software. Companies usually view these transactions as investments rather than purchases, as it is expected the software will justify its cost within a certain amount of time.
The justification component of purchasing a product or service is based on the performance of impacted KPIs. It is important to identify key KPIs that are relevant and measurable. Setting goals and benchmarks provide the reasons you are taking on such a project.
Dr. Jain highlights the significance of small-digit improvements that are worth millions of dollars. This instantly justifies the cost of demand planning software, which cost a fraction of that amount. In conclusion, Dr. Jain articulates a clear business case for implementing demand planning software to improve forecast accuracy. If you are interested in seeing how Vanguard Software can improve your demand forecast, contact us today.