Client Courier Ltd. has hired Capstone Consulting Group to support its efforts in improving forecast accuracy and efficiency in its Western Canadian distribution centres. Many of the Client's employees have lost confidence in the current corporate forecasts and are relying on their own personal judgment to make important decisions. As a result, Client feels that inaccurate forecasts are contributing to poor decisions on both strategic and tactical levels.
Client makes many forecasts that represent different regions, activities and employee groups, and makes monthly, weekly, and daily forecasts for each of them. Capstone has agreed to provide a comprehensive tool that will enable managers and front-line staff alike to produce forecasts so that they can be easily used to make important decisions.
Capstone considered several new forecasting methods that could increase forecasting accuracy, including: ARIMA, Time Series Decomposition, the Theta model, and Triple Exponential Smoothing (TES). It was decided that TES was the best method to use for Client?s monthly and daily forecasts as it produced the best forecasts for 2002 when data from this year was held back.
To further improve Client's forecasts, Capstone has customized the TES model to incorporate several unique features of the company's historical data. The accuracy of this new model brought the average forecasting error down 56% from Client's previous forecast error. This difference was measured using mean absolute percent error, and is an average of all forecasts.
Once a suitable methodology was agreed upon, Capstone began creating a user friendly VBA tool that could be used across the organization. The tool is capable of incorporating new data and modifying forecasts to reduce errors. Capstone feels this tool will be incredibly useful for Client's Western Canadian region and hopes that its success will contribute to Client's competitive advantage in the courier industry.