Its been a rough few years for forecasters and 2011 is already proving challenging as the stoires of UPS and Home Depot illustrate.
For UPS the price of fuel is pretty important - so what was their forecast for 2011? In the December 27th issue of Fortune (less than 3 months ago), Bob Stoffel, Head of Supply Chain at UPS described the company's assumption:
"For the near term we're forecasting it will be around $78 a barrel right about where it is now. We think it will be pretty stable next year (2011)."
Today oil is north of $100 a barrel - so even UPS' 90-day forecast is way off. But UPS does not simply rely on a single assumption. Stoffel went on to say:
"But as part of our strategy, we do scenario planning, and we did a plan called Oil 200. It played out exactly like the recession."
While not an encouraging thought it does illustrate that today scenario planning is not simply a cool tool, its a management imperative.
Home Depot has long used a measure of investment in residential property as an aid to forecasting and for a long time it worked well. But not anymore. The company is dropping the measure and moving back to a broader GDP measure. As CFO Carol Tome commented, "''Housing's just not as important as it has been, it's just not that relevant.'' Think about that for a minute - housing is not relevant to forecasting a home improvement business! It really is a strange world out there. Read the full story here
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