Back to the future
Planning processes have become increasingly complex, because of the ongoing adoption of new products and technologies, acquisitions, and a growing need for a more joined-up planning approach. The mandate at the C-level is real-time analytics. To achieve this, a conduit for ML (‘machine learning’) and predictive analytics is a requisite for the planning of tomorrow.
Before implementing a planning tool, you need to take stock of the current planning process, assess your organization’s readiness, and implement the change management needed to prepare for the planning and analytics future.
Among the factors you should consider are data readiness, the functional ownership of the planning process, and the organization’s culture.
Data integrity must remain chief among the enterprise strategy. This pays homage to the old adage of ‘garbage in, garbage out’, in that to ensure executives are utilizing the most accurate forecasts and data points at the lowest level of granularity, this starts with data cleanliness looking forwards and backwards.
It’s important, too, that each functional area of your model – whether it’s revenue, COGS, workforce planning, Capex, or any other – should have a dedicated process owner. These owners should have the final call on the data used, its part in the overall planning process, and how it will interact with other areas of your model.
Lastly, the impact of organizational culture should not be underestimated. Leaders need to assess the extent of organic internal collaboration, which serves to identify pre-existing or potential organizational silos.
Put simply, organizations must revert back to the planning fundamentals if the intent is to maximize the future planning and analytical strategy at the enterprise level.
Don’t allow tail risks to become a tail between your legs
While all companies encounter tail risk (or ‘black swan’) events, many have found themselves flat-footed. Lacking information into how internal and external factors were impacting their business, they were unable to identify and react quickly.
Planning processes are made up of disparate spreadsheet-based systems at most companies. Within the enterprise, and within S&OP (Sales & Operations Planning) specifically, an inability to properly plan or forecast demand can be detrimental to your production plans.
For example, a manufacturer could have production plans which don’t align with fluctuations in customer demand. With different functions operating in isolation, and with no overall collaboration on a single direction, there will always be inconsistencies, and it’s hard to course correct quickly, when everyone’s starting from a different base.
Tell me where it hurts
We’re living through a period of real economic uncertainty. The impact of inflation and supply and labor shortages are forcing companies to make tough decisions around whether to pass the increased costs on to their customers or protect their market share. At the same time, consumer spending is impacting demand, inflation is affecting the quantities of goods being purchased, labor rates are driving variable costs, and fluctuations in interest rates can be either beneficial or damaging, depending on whether you’re a lender or a borrower.
It’s not surprising, then, that leaders are looking to plan on a more granular level.
Vuealta has seen increased analysis of pricing and margins, organizations adding more scenario and sensitivity analysis, and S&OP transformations driven off market change and tension. Questions revolving around increased labor costs and resources, inflation on raw materials, and how the competitive landscape could be impacting forecast and pricing strategies is in the forefront of every executive today.
Companies must stress their inputs and look to understand where their sensitivities lie, and how planning can help protect businesses against today’s volatile market conditions. I’ve outlined a few checklists and takeaways below, which could help your organization dial-up your planning capabilities. Contact us here if you’d like to discuss your readiness for Anaplan.
Checklists and takeaways
Three dimensions of Anaplan readiness
- Data maturity
- How many places do I access raw data? Is there a data lake?
- How much time does my team spend every month managing and massaging the raw to data to get it ready for planning?
- How confident am I in forecast accuracy?
- Is my budget file named “Budget V12 FINAL FINAL 2.xlsx” every year?
- How responsive are other areas of the business? When I’m planning, are there any bottlenecks outside of my team?
- Is planning a shared process, or is the Excel file / outputs passed along as each function completes it planning and adjustments?
- Is my team willing to learn and accept a new software?
- Does my team understand the current planning process or are they new to our company?
- Have I gathered all the necessary resources from outside of the team to set aside time for the project?
- Do I have IT resources available to help with automated data integration?
- Are there any other major projects or reporting needs that will take my team’s time during a project (e.g., over the next three months)?
Four ways to establish a world-class planning capability
- Consider the flexibility, agility, and adaptability of your model.
- Look at the inputs to your models. For example: your analytics team uses statistical methods. Product team uses lifecycle management. Sales uses customer conversations and pipelines. Marketing uses macroeconomic data. Demand planning uses product mix. All these plans should ladder up into a single demand plan within the organization.
- Conduct a periodic review to monitor the health of the business and discuss shock absorbers for unplanned events.
- Add external drivers to further enhance the accuracy of your analysis and planning. Examples include:
Three upgrades you could bring to your models
- Pricing and margin analysis – understand the trade-offs and where your business needs to adjust its pricing strategy
- Scenario and sensitivity analysis – run different scenarios to know what areas of the business you need to defend, and which parts are the most sensitive
- Detailed labor and workforce planning – analyze efficiencies and how labor spend will impact the bottom line