Stability and Innovation in the Use of Forecasting Systems: A Case Study in a Supply-Chain Company

Abstract

Computer-based demand forecasting systems have been widely adopted in supply chain companies, but little research has studied how these systems are actually used in the forecasting process. We report the findings of a case study of demand forecasting in a pharmaceutical company over a fifteen-year period. At the start of the study managers believed that they were making extensive use of their forecasting system that was marketed on the basis of the accuracy of its advanced statistical methods. Yet the majority of forecasts were obtained by using the system’s facility for judgmentally overriding the automatic statistical forecasts. Carrying out the judgmental interventions involved considerable management effort as part of an S & OP process, yet these often only served to reduce forecast accuracy. This study uses observations of the forecasting process, interviews with participants and data on the accuracy of forecasts to investigate the reasons underlying the managers’ use of the system at two levels, the individual and the organizational. This evidence is then interpreted using various theories to understand the longevity of the company’s forecasting process, despite potential economic benefits that could be achieved through change. However, 10 years after the original case observations radical transformations of the forecasting system were introduced. The paper concludes by considering the impetus for adopting the new system and processes, and the changes in organizational practices this has led to.