In many organisations, forecasts are like opinions. Everybody seems to have one.
Dig deeply, and you will find confusion about the meaning of the word forecast. Some people believe forecasts are what the sales organisation says they are going to sell, or possibly what their sales target is, or what the supply organisation thinks that the sales team is going to sell and, therefore, what the supply organisation says it will produce.
Some people think it is how much revenue the sales organisation will generate and, therefore, what the finance organisation will use to communicate their financial projections. And if these financial projections don’t match the annual plan, they will create their own revenue projections. If the sales and supply organisations’ financial projections are far enough off from the annual plan, the finance organisation will “ask” them to change their forecasts.
The result? Each function – Sales, Supply, and Finance – operate based on their own opinions. Poor corporate performance is the inevitable consequence of companies operating from multiple forecasts: Excess inventories, low customer service levels, high overtime and expedite costs, and lost sales opportunities, not to mention lower than desired revenue and margins. Companies waste countless hours trying to reconcile these different views, with very little benefit derived from doing so.
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