The Impact of Forecasting Improvement on Return on Shareholder Value
John T. Mentzer; Journal of Business Forecasting

Improving Salesforce Forecasting
Mark A. Moon and John T. Mentzer; Journal of Business Forecasting

Benchmarking Sales Forecasting Management
John T. Mentzer, Carol C. Bienstock, and Kenneth B. Kahn; Business Horizons

Previous Webcasts--
Three Keys to
Successful S&OP
Wednesday, October 26, 1pm Eastern, 10am Pacific
Principal Speakers
Tim Vaio, Managing VP,
Hitachi Consulting
Seema Phull, Director Process & Technology,
Enterasys Networks
Click here to view recording


State-of-the-Art Sales Forecasting Management
September 13, 1pm Eastern, 10am Pacific
Principal Speakers -
Professor J. Tom Mentzer, University of Tennessee
Todd Jones, Sr. Director
Sales Operations, QLogic
Click here to view recording

Could Your Company Use a Planning Hub?

By Anil Gupta, Principal, The Applications Marketing Group

Let's face it, the planning process in most companies is mostly manual,
and usually tedious. Every department creates its own plan, typically using a spreadsheet, based on their own set of assumptions and perspectives:

• Sales develops a revenue forecast by region by customers in dollars based on the state of the current pipeline and the overall revenue objectives for the next year.
• Finance creates an operating plan in dollars by internal organization based on the current year budgets and next year projections.
• Marketing creates a forecast in dollars and units for new and existing product lines based on their market research activities.
• Manufacturing develops a detailed demand forecast in units by SKU numbers and components based on past history and future business plans.

The result is like the unusual “hybrid” vehicle in Figure 1 below, because the organization now has a set of different plans with different perspectives that can not be easily mapped to each other.

These plans are then manually reconciled by the finance organization to identify and understand the gaps. Typically the reconciliation process involves days of back and forth emails, meetings and phone calls so the finance department gets a better understanding into the underlying assumptions made while creating the plans. Departments are then asked to tweak their respective plans to ensure that the various plans reconcile with each other within an acceptable margin of error.

The manual reconciliation process is not only slow, it makes the entire planning process error-prone, and is often not very responsive. As a result plans are updated infrequently – at best once a quarter and most often less frequently. However, the business environment changes much more frequently and in many markets, plans made a quarter ago may no longer serve the company well. This is especially true in fast changing industries such as high technology and telecommunications. As a result, companies find themselves operating on a plan that will result in lower than expected revenue/margins or missed revenue opportunities or potential inventory write-offs or less than planned customer service metrics. In addition, due to the slowness of the reconciliation process, each department begins to execute to the plan it created, while waiting for the plan to be finalized, resulting in organizational misalignment.

The Planning Hub is a new approach that simplifies the planning process and enables organizations to plan better, more frequently. It enables a company
to quickly create a baseline demand plan and then leverage the embedded analytics, collaboration and workflow aspects of the planning hub technology to easily refine the base demand plan by incorporating the various departmental plans and their underlying assumptions. The resulting ‘consensus plan' then becomes a single shared plan within the company. In addition, The Planning Hub enables the company to update the plan easily on an ongoing basis – even once a month, so it is always in step with the market conditions.

Instead of working with multiple departmental plans, each within an acceptable margin of error, the company operates off a Enterprise Plan of Record from the planning hub. It is a single repository of past, present and future forecasts, plans and assumptions across the entire enterprise. It reconciles the disparate aspects of each functional plan into a single model, while retaining the integrity and detail needed to turn business strategy into functional action plans.

Each functional team views the plan in their terms-- units, dollars or margins-- from lowest product detail to top-line revenue forecast. Finance teams can continuously determine alignment with business plans for revenue/margin outcomes, create alternative business plan scenarios, and conduct modeling exercises. Differing price, product mix and sales assumptions can be used to determine business plans that maximize profits, not only revenues. With a consolidated, viable operating plan for the organization--executives, managers and planners are able to consistently drive results, measure performance and ensure compliance.

Companies like Tellabs, Enterasys, FedEx Freight, Harley-Davidson, Qlogic and Air Products are using vendors like Steelwedge Software to create enterprise planning and performance management metrics using the planning hub paradigm. The Steelwedge solution enables companies to streamline their planning process, ensures that all departments are working off the same plan and provides a framework for enterprise-wide performance management. It also reduces the planning cycle time to enable more frequent planning and makes it easy to plan more frequently and allows the company to stay more in step with the market conditions.

Anil Gupta is a principal at The Applications Marketing Group Anil Gupta,
a marketing consultancy that assists their clients in developing product positioning and strategic sales tools for enterprise software companies. He also assists CEOs of startup software companies as interim VP of marketing. He has specific expertise in ERP, supply chain and analytics applications.
He also acts as a research advisor to the Ventana Research, an analyst firm and is focusing his research on application of analytics to IT management.
Anil has been a VP of Strategy and/or Marketing of enterprise software companies such as Baan, Niku, Evolve and Oracle.