A recurring issue observed when we conduct assessments of manufacturer “Gross to Net” operations is the apparent disconnect among multiple stakeholders on the role and responsibilities of the forecasting group. Similar to organizational and project charters, most disconnects can be resolved through the exercise of creating a forecasting charter.
Ideally, the forecasting function should act as an unbiased consolidator of information from multiple groups such as the brand teams, market planning and research, contracting, government pricing, and supply chain. Inconsistencies are ironed out and an independent view is developed of how all stakeholders perceive the brand and the market to evolve short and long term.
As forecasting outputs, in practice, typically help define goals and incentives for different stakeholders who provide inputs, each group can overlay their own expectations, demands, and biases on the forecasting team, particularly during review and approval stages. But lacking executive input on expectations and the role each involved party plays in the process can lead to confusion, inefficiency, and inaccuracy. Mistakes can become very costly, especially if key input from planning and financial projections is missing.
Facilitated sessions — with stakeholders individually and then collectively — can help unravel potential biases, align group expectations, and create unified organizational vision in terms of a documented “Forecasting Charter.” The contents of the charter may vary, but it typically addresses the following questions:
- What are the responsibilities of the forecasting group?
- What is the ideal mix between value added and operational activities?
- What types of forecasts are needed? How far ahead and why should they be prepared?
- What level of detail is needed and why?
- What is the forecasting philosophy?
- Which forecasting approach should be used and should multiple approaches be used?
- Is bottom-up forecasting used in all cases? If not, is there a reconciliation process between top-down and bottom-up forecasting?
- Should specific deal forecasts tie into overall market forecasts? If not, what is the margin of error?
- Who should participate in the process?
- Should there be monthly consensus meetings?
- How often should forecasts be monitored and revised?
- Should you document forecast accuracy?
- Who should have the authority to override forecasts and what are the override thresholds?
- How should you handle ad-hoc requests?
A gross to net forecasting charter can provide clarity to the forecasting group in their daily operations as they manage feedback and requests from multiple stakeholders, as well as ensuring they are providing value executives are expecting them to provide.