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Vol 25 - No 07 - September 1999 Letter: Response to Jeff Banning Article Forecasting & Planning Firstly, I refer to Jeff Banning's interesting article on Forecasting & Planning - July/Aug 99). Jeff uses the term 'demand plan' to describe the company's sales and operations plan, ie. the balanced plan of what will be both sold and made. At first I thought this was just terminology, but Jeff states that this demand plan should be owned by the Sales & Marketing function. At this point, then, I must offer an alternative view: The demand plan starts life as what Sales believe they will sell. I agree absolutely with Jeff that this is not just the forecast. The forecast is the starting point which is then subjected to critical review within the Sales & Marketing function, at the end of which a sensible demand plan is created. This is owned by Sales & Marketing. The demand plan is then submitted to Manufacturing who, using MPS/RCP/etc., will determine whether they can meet this plan, what actions may be needed, what changes they may ask for, etc.. Then, following a reconciliation meeting between Manufacturing and Sales, a compromise operations plan is proposed, achievable by both. The original demand plan is now dead and ownership of the new plan is now joint between Manufacturing and Sales. This proposed plan is then the basis for a Sales & Operations Planning meeting with the Managing Director and all the major business functions represented. The result is then the business operations plan, owned, in theory, by the Managing Director, but in practice by all. This is the integrated plan, the final demand plan, manufacturing plan, financial and all other plans - the 'one set of numbers' or 'hymn sheet' - from which all functions are 'singing'. Within the whole process, I would also place more emphasis on assumptions, particularly in demand. Any demand plan will contain a lot of uncertainty, the important elements of which should be clearly documented. Financial projections or Manufacturing plans may also need assumptions noted, but there will be less of them and they are likely to be more transparent anyway. Sales will experience much more change in meeting the plan and understanding why these changes occurred will be important in future demand planning. A process for clearly documenting assumptions, in the form of risks and opportunities, behind each sales plan, is a vital component. Secondly, I spotted this month's deliberate error (is there a prize for this?). In Jeff Banning's Figure 3 the blue line must surely be end customer sales and the grey line manufacturing shipments. John Hackforth, IMM Ltd. Related Topics:
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