There is one plan that speaks to all departments in an organization, with the highest organizational breadth and complexity: the profit plan. Most profit plans extend to 12 months with quarterly reviews. However, behind the scenes, planning is an ongoing process that happens throughout the year at different levels depending on the availability of resources. Ultimately, all functional plans feed off of each other to support the company’s overall journey towards short- and long-term plans and objectives.
A creditable profit plan is supported with accurate and reliable supply chain planning, consisting of:
- Demand planning
- Sales inventory operations planning (SIOP)
- Materials resource planning (MRP)
- Supply planning
These components together create a compelling vision of the financial implication on revenues, cost, and working capital. Being able to respond to any instance as it occurs in real-time increases the effectiveness of damage control, not to mention alleviating some of the pressure.
Demand planning software sets performance benchmarks, efficiently allocates resources, and optimizes targets for revenue and ultimately, profit. Companies depend on accurate demand forecasting at different times to improve production scheduling, inventory management, logistics, and financial planning.
Companies collect data and formulate algorithms that convert that data into information, which is then plugged into software solutions that craft forecasts used in planning. With the vast amount of data available through demand sensing, software solutions are required to ingest and analyze large volumes of data, commonly from multiple sources.
Sales inventory operations planning (SIOP)
Sales inventory operations planning (SIOP) is a cross-functional process designed to help users understand the planning balance between supply and demand. By establishing a common language for information to be shared among all functional groups, communication regarding market changes is improved.
This monthly process can be broken up into five steps, ultimately leading to consensus across all related departments:
- Data gathering and product planning
- Demand planning
- Supply planning
- Regional executive approval
Materials resource planning (MRP)
In an effort to keep up in an increasingly lean manufacturing environment, companies implement a material planning process that maintains valid material plans along with a control process. This control process communicates the priorities through the following techniques:
- Min max planning: Uses min and max inventory values for items and maintains on hand balances between these two levels
- Kanban planning: Determines Kanban size, number of Kanban cards, minimum order quantity, lead times, lot multipliers and safety stock days
- Reorder point planning: Uses reorder points and reorder quantity values for items and maintains on hand balances required to meet forecasted demand during lead time plus safety stock
- MRP: Calculates how many materials of particular types are required, and at what times they are required
The last piece of the puzzle in crafting the profit plan is supply planning. Software solutions specialized in supply planning assist leaders in manufacturing and forecast demand for all the resources required to manufacture and deliver the finished goods.
Baseline forecasts should be generated that users can fine tune using industry insights that are not known in the historical data. When considering solutions, pay special attention to products that automate routine tasks and apply advanced analytic methods to efficiently optimize key drivers affecting your supply chain management process.
Companies talk about achieving goals and objectives daily, but how to achieve a successful profit plan is often left out because no one wants to be the reason a target is missed. Vanguard acts as the connection between putting plans in action and actually achieving them.
Vanguard’s IBP platform, Vanguard Predictive Planning, skillfully handles all four components with ease, allowing you to worry less when the time comes for the next quarterly review. Reach out to one of our specialists to find out how to improve your forecasts.