Forecasting Discipline

by  Charles Smith

Many small and medium size semiconductor equipment and materials (SEM) companies have yet to install forecasting systems which are designed to let the company know, with a high and growing degree of accuracy, the amount and timing of new business bookings. To attain such results, the company must instill in its sales and marketing people the level of skill and determination required for forecasting success in this fast-paced industry. Forecasting skills in successful SEM companies have moved on from the "corporate guess". But surprisingly there are still those whose techniques of forecasting are little better than the wet finger in the wind.

The field sales person's monthly and quarterly bookings forecasts must now be interpreted by management as a COMMITMENT to make a sale happen when and as forecasted, rather than merely letting it happen once it has been forecasted. And making this COMMITMENT means pulling together the company's resources to ensure that the forecasted order doesn't get derailed. Account sales people must drive the process, and they must involve product marketing, support and executive focus as required to achieve perspective and judgment on the account in addition to moving toward close.

"Commitment to sell", when applied to their forecast, is an expression that isn't easy to handle for many sales people. But they are slowly learning, often at great cost to themselves and their companies, that the press to forecasting discipline is irreversible. Key among the driving forces toward high forecast accuracy is the speed with which this industry moves. Each SEM company's mandate to respond promptly to a customer's need requires that products with extensive and expensive bills of materials be built to forecast rather than to order. With such a huge cash commitment to be made by the supplier company to meet the customers' requirement, the dependability of the forecast must obviously be very high.

The consequences of poor bookings forecasts are huge. Orders forecast but not booked in timely fashion tie up inventory and labor that can't be converted to operating capital. Deliveries for other customers may have been promised later than need be; people may have to be furloughed. And orders not forecast but booked ("bluebirds") are barely better. A "hurry up" insertion into a crowded manufacturing schedule can cause quality problems, cost overruns and multiple delivery slippages. Hard-won customer relationships can be damaged or ruptured. And the company's reputation may suffer.

Forecasting accuracy and commitment to sell by field sales people are at the heart of professional selling in the semiconductor industry. Trained and experienced sales pros understand that accurately forecasting the booking is the culmination of a lengthy and complicated process involving understanding each customer's true needs, successfully dealing with a wide range of the customer's people and their individual personality types, overcoming all the objections that surface throughout the sales process, judiciously applying the company's support resources, negotiating and finally closing the deal as a win-win contract. The sales person's charm helps, but it's only the lubricant on a complex selling machine that has to operate 24/7 until the deal is done. The process calls into play all the sales skills and instincts carefully honed in the field. That's how the critical relationships get built that make the next order easier. Thus, the forecasting system IS the professional sales team, which is fully supported from the factory

Sales managers play a key roll in developing field sales people who learn to forecast consistently and accurately. The sales manager can and should make failing to achieve the forecast an uncomfortable but constructive experience. When a forecasted order is lost, it must not be a trivial event for the sales person or for the marketing and support groups that were involved in the process. A Lost Business Report is the typical vehicle for such a discussion. Too often, however, such reports are circulated, then filed -- and that's it. Wrong!! When the corporate consequence of losing an order (especially if it's the first system on a line or in a fab) are extreme, there must be a focused examination of what happened by the full team. Can the loss be reversed (it usually can't)? How can the mistakes be corrected so they won't occur again? Does the process need to change, and if so how? What is the strategy now for this customer? The answers to these questions make for uncomfortable meetings, but there must be closure and accountability for the important event of a forecasted order, which was lost. Multiple such happenings for the same sales person are usually not tolerated in a professional sales organization.

Good sales managers can and should also make accuracy and consistency in forecasting a positive experience by praising the sales persons in front of their peers and management, by ensuring in-factory support, and by financial compensation that reflects the importance of success.

Forecast accuracy is virtually the culmination of sales professionalism because to be accurate the sales person must be doing most things well. Being "in front of the order" is the expression Bob Graham of Novellus used for that condition -- and for the state of the customer relationship he demanded from his sales teams. He was right.

‹‹ Charles Smith [About the Author]