Involving people at all levels in predicting future conditions can be more accurate than relying on experts, say procurement advisers Positive Purchasing.
In its latest Thought Leadership article Let the people predict! the UK-based consultancy says procurement executives are often held back by poor volume forecasting of sales, capacity and other factors to help decide how much of a given product or service will be needed.
Positive Purchasing Vice President of Online Operations David Rajakovich says the answer lies not in ever more expert analysis but in the “collective brain of employees and suppliers”.
The concept is relatively new, Rajakovich says, first brought to wide attention by the American financial journalist James Surowiecki in his 2004 best-seller The Wisdom of Crowds. But the principles are as old as the hills.
“Have you ever been near a tourist attraction, but not been sure exactly where the entrance is? If you followed the crowd, it most likely led you right to where you needed to go. Individually, you nor many of the other people, would have known where to find it -- all you had to go on was that run-down sign post a block away -- but collectively, you knew.
“Prediction markets harness the wisdom of crowds for just about anything that needs to be forecasted, in a way that is as effective as it is counter-intuitive.”
The approach can predict levels of demand for a given product or service over a period of time and this information can then be used to help suppliers plan production, thus limiting overproduction and cutting costs which can be shared.
Benefits also include improvements in supplier relationships and contracts. Further, Rajakovich says, “if key business decisions are being made based on the estimates provided from people at all levels of the business, and even outside the business, everyone feels a sense of pride and ownership in the outcomes.”
Setting up a prediction market need not be a complex operation, Rajakovich says. The key is to get as many estimates as possible before a measurable event from anyone with any knowledge of the situation.
Only the most advanced, innovative organisations are using prediction markets today, he says, so those who adopt the approach will be able to gain competitive edge.
Notes for editors
Let the people predict! can be downloaded at: www.positivepurchasing.com/getdoc/538a7d92-f6a8-41e0-895b-5e...
About Positive Purchasing
Positive Purchasing is a leading strategic purchasing consultancy providing education and training, procurement transformation, best practice purchasing tools and online learning and resources. Positive Purchasing enables today's global companies to develop their purchasing function to achieve greater effectiveness.
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