DAO Web Page of Fame

Celebrating Summer Successes Since 2006

  INDUCTEE:  Christopher Langbein

YEAR:   2006

CATEGORY: Regression

 


Chris Langbein used regression analysis
to forecast monthly working capital needs at ConocoPhillips. With a standard deviation of monthly working capital net balance running close to a billion dollars, the ability to reduce this uncertainty using Langbein's models will lead to substantial savings through the reduction of the amount of cash carried to cover the monthly fluctuations.

Langbein immediately recognized that this month's working capital amount should be the starting basis for predicting next month. With this insight, he set about looking for (and finding) predictors of change in working capital.

"I was asked to build a model that could predict key cash flows. In fact, my bosses told me that they weren’t sure that it could be done, but thought it would be a good test for a summer internship. Little did they know what they got themselves into, for I had the entire DAO toolbox at my disposal."

"The model successfully predicted the future month’s working capital to within a standard deviation much smaller than the billion dollars of natural monthly standard deviation."