Volume—Variance Analysis

Volume—Variance analysis By larry lapide, Ph.D. (This is an ongoing column in The Journal, which is intended to give a brief view on a potential topic of interest to practitioners of business forecasting. Suggestions on topics that you would like to see covered should be sent via e-mail to llapide@mit.edu.) A A t a conference this past June, I ran into Alan Milliken who works at chemical giant BASF and who is a frequent presenter at Institute of Business Forecasting and Planning (IBF) events. He was saying that the hottest topic in demand planning—especially during these difficult economic times—is what he termed the Volume-Variance Analysis (VVA) demand planning strategy. It may be that he came from a chemical industry event where several presenters talked about how they were using it to better plan product supply. He stated that one chemical company just successfully implemented a demand planning system. The first attempt at implementation failed because the VVA strategy was not enabled. He strongly believes that more demand planners should start using it, that the IBF should have more training sessions on it, and that software companies should imbed the concept into their ...