Tag Archive: forecast

The Value of Alignment: Sales, Operations & Finance

May 30th, 2019

Alignment might sound like a fluffy concept, but it delivers bottom line results. Our most successful clients have achieved the most substantial results from alignment. Although SIOP (Sales, Inventory, Operations Planning) gets a wrap as a technical topic, in our experience, it is the alignment portion of SIOP that delivers the bacon!

For example, in one client project, the Sales Leader was concerned about service levels. He knew that service was the differentiator in the marketplace, and if they didn’t have quick lead times and responsive customer service, it would negatively impact his ability to grow the business. On the other hand, planning knew that sales tended to come in dramatic spikes which were hard to predict in advance and so strategic inventory could make sense. Operations wasn’t too keen on inventory since they had a lean mentality with the view that inventory was ‘bad’, and they were concerned about capacity and staffing. Accounting set rules on overhead rates as a percentage of sales on a monthly basis which caused HR and Operations to hire and fire temps continually (and sometimes full-time resources). Overtime wasn’t used as a rule of thumb and was seen as costly by management, In fact, it was the only client we’ve ever worked with that didn’t use at least some percentage of overtime on a continual basis. And, of course, R&D created new products and had no idea about the volume and the impact on capacity and staffing. In essence, no one was on the same page!

We created a demand plan based on historical forecasts with sales input, confirmed the capacity and staffing levels required to meet that forecast and determined that if we level loaded the forecast over a quarter, we could create a win-win: improved service during the sales spikes with improved margins (lower temp turnover, improved efficiencies etc.). But it didn’t matter if we didn’t align the team. That was the 80/20 to creating success (and is ALWAYS the hardest part). Fast-forward 3-6 months down-the-road: We shortened service dips from the sales spikes, increased the service levels and reduced costs.

These types of client results are commonplace with alignment no matter your position in the supply chain or the world. Have you considered whether your teams are saying they are aligned or whether they are truly using the same playbook? It often will make the difference between a happy customer and a disgruntled one (which isn’t something anyone wants in today’s on-line era), let alone the profit impacts. If you are interested in an alignment assessment, please contact us.

 

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The Value of Demand Planning

February 13th, 2018

In supply chain circles, there are lots of exciting concepts to discuss and debate such as lean, master scheduling, theory of constraints and many more; however, we have found that our most successful clients start with the customer!  

If you concur that we are in an Amazon-impacted marketplace where the customer is king (no longer is it cash!), prioritizing demand planning is essential.  

Do you have a position focused on demand planning?  Or do you have someone who knows it is at least part of their focus?  Does anyone realize its importance?  Let’s discuss the value…

  1. Without customers, you have no company– understanding their needs and what will compel them to buy from you vs. the competition couldn’t be more important.
  2. Do you know how your forecast compares with the recent past?– Again, understanding your customers and why they are changing couldn’t be more important to positioning your business to succeed long-term.
  3. Let’s take a step back – do you have an idea of what you think you’ll sell this year?– Let’s hope so!  Imagine how hard it will be for your HR resources, your operations resources (to determine which machinery to prioritize, purchase and train on), your suppliers and more to run efficiently while serving you and your customers if everything is a surprise.
  4. Is your sales mix changing? – We’ve seen many clients who spiral into a mess not because they don’t have a forecast but because they have no idea that the product mix has changed.  Different products come with different materials, different skills, different complexity and different requirements overall.
  5. What is the timing?– We’ve also seen clients with predictable annual sales (actually incredibly predictable) yet the monthly, weekly and daily sales could be vastly different.  Operations couldn’t keep up.  The customer suffered.  Margins declined.  Timing matters!

We would venture to estimate that 99% of our clients can benefit from an increased focus on demand planning.  Why not give it a go?  If you would like an audit of your current process, please contact us.

 



Forecasting: How Far Should You Look into the Future?

July 3rd, 2017
SIOP S&OP

Setting strategy or designing a sales, inventory and operations planning (SIOP) process requires forecasting. How far into the future do you look and why?

Whether setting strategy or designing a SIOP (sales, inventory and operations planning) process, one of the most important questions to consider in forecasting is how far into the future will you look? And why?

As we think about whether the answer should be 1 month, 1 quarter or 1 year, check your thinking. When assessing the future it is important to think through the elements that may impact your forecast.

10 Questions to Ask When Forecasting and Designing SIOP

1. Do you have customer contracts in your business/ industry? If so, how far out do they go?

2. Regardless of the commitment level, how far out do you have information that is somewhat reliable? If it changes substantially from month-to-month, is it of any value?

3. How reliable is your forecast by product or customer grouping? Forget about items and sku-level forecasts. How about product category forecasts?

4. Do you have access to demand data into your supply chain?

5. Are you asking questions about what is coming down the pike? If not, why not?

6. How much cushion do you have? Do you have inventory or capacity availability?

7. How prepared is your supply chain? Can they handle volume spikes?

8. Are you willing to dedicate people to gain a view into the future? Why or why not?

9. Have you considered a strategic sprint? Why are you setting arbitrary time frames when customers don’t care what you do? They want what they need when they need it.

10. Are there downsides to looking too far into the future? What are they?

 

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Data, Data, Data

May 17th, 2016
how do connect data

Many manufacturers and distributors focus on collecting data rather than using it to analyze performance and achieve business results.

“Data, data, data” seems to be the hot topic for manufacturers and distributors, similarly to “location, location, location” in real estate success. What is going on?

As technologies have come a long way from the “old” days, we have massive amounts of data I heard this statistic last week – 1 gigabyte cost $1 million in 1980 whereas it costs 1 cent today. Clearly, it’s affordable and accessible. Now what do we do with it?

Here are some options my best clients have been researching:

  1. Dashboards: Get the “right” ERP system for your needs and display key metrics on a dashboard. We want to be able to slice and dice information to rapidly get to what we want when we want it — in a nice, visually pleasing format.
  2. Demand data is gold: Undoubtedly, my best clients use demand data from their supply chain to outperform their competitors — and sometimes to collaborate with competitors for win-win outcomes. A forecast is better than guesswork but actual consumption information from your customer trumps all.
  3. Big data: There is more hype over this than anything else; however, since there is a ton of it available these days, those executives who figure out how to make good use of this information will succeed.
  4. Connections with data: The internet of things is spurring new uses of information. How do we connect data from our fit monitors, alarm systems, appliances, etc. in a meaningful and useful way?
  5. RFID & Barcoding: Although these can be considered “old school”, they are also solid tools that can provide tangible benefits in the right situation.

Don’t just collect data to collect data. It might be similar to being a hoarder. Although it can be stored on tiny devices, the key is not to collect it but to USE it to achieve business results. If you’d like to talk further about how to do that for your company, contact us.

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The Value of Thinking about the Future Instead of the Past

November 4th, 2015

supply chainI was just talking with a manufacturing client on the topic of SIOP (sales, inventory and operations planning). In their case, they have an incredibly stable business – it is the most predictable business I’ve ever run across in terms of sales forecasts. Even though the numbers vary by month, they are surprisingly reliable – and even more so when looking across a few months. Thus, we had downplayed the importance of the forecast in their case; however, in conversation today, we decided to resurrect the idea of looking forward. Driving with both eyes in the rearview mirror is not a recipe for success. In our case, to bring about a nice step forward, we need to start thinking forward instead of backwards. As I left, I thought – isn’t this true across the board? Why are these truisms so easy to forget?

I also recently participated in a strategy session about my business. Certainly looking in the rearview mirror provides some helpful information on revenue and cost trends for comparison purposes but if I plan based upon the past, I will not grow! Thus, we looked forward to create the future and then looked backwards to see what types of resources and tools I had at my disposal to determine what needed to be done to achieve the future vision. Are you looking at your future or stuck in the past?

One tip to implement this week:

As I found today in talking with my client, the great thing about this topic is that you can accomplish a lot by simply remembering to “think about the future”. Include conversations about the future in key meetings. Talk with your employees about the future. After all, how will they be able to build the right skills if they have no idea what is needed in the future? Look at forecasts. Predict important trends. One simple rule of thumb is to track how much of what you do and talk about on a daily basis is related to the past vs. the future? Of course you should look at the past for how to resolve root causes; however, innovation only works by looking forward. Write yourself a sticky note! Soon, your work life might even become more interesting!

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”