Forecasting & Planning

Chances are, your business has a business plan, whether it is regularly updated or something that sits in a drawer gathering dust. Do you have a sales forecast? Does it match up with the revenue forecast in your business plan? If it doesn’t, then surely it should?

Sales forecasting is notoriously difficult, but it is nevertheless important. Using the information you have available, it’s your best guess at what you will sell, and therefore the basis of the cash you expect to receive and what you need to make or buy to meet your customers’ needs. If you can get information from your customer, so much the better – even if it’s wrong, it can help you build consensus. The basis of most forecasts is sales history, and there are tools and techniques available to help measure and improve base forecast accuracy which should be overlaid with whatever market knowledge is available.

Using a sales forecast as the basis of your production plan makes sense. Even if you operate in a fully make-to-order environment, the forecast can be used to establish what resources will be needed (including labour, machine time, materials as applicable). High level capacity plans can be created to predict peaks, troughs and pinch points and allow long term plans to be put in place to accommodate these. Shorter term detailed production plans allow operations to be planned effectively, maximising use of resources and driving material plans to ensure supplies are in place.

Inventory can be used to buffer volatile demand, smooth the peaks and troughs, and facilitate efficient operations. But there are costs involved, from storage and tied up working capital, to the risk of obsolescence, so the use of inventory should be carefully assessed and an inventory policy implemented, alongside stock control processes.

Integrated Business Planning (IBP, also known as Sales & Operations Planning) is a cycle of activity which takes all of these into account, along with product lifecycle planning and financial outputs to provide “one set of numbers” which are aligned across the business, and where reality deviates from the plan, puts in place actions to close the gaps.

With more than 20 years of in depth experience of dealing with these issues in businesses large and small, we can offer guidance and advice, and get involved in improving your forecasting and planning as a one off exercise or on an ongoing basis.

Supply Chain Scotland