If you fail to plan, then you’re just planning to fail.
Wise words to live by — but for manufacturers, it’s not that easy. A manufacturer can craft countless plans and yet still see their production goals go up in smoke. Today, one of the greatest challenges manufacturers and their supply chains face is accurately forecasting demand.
Granted, some problems are outside of manufacturers’ control. A customer may go out of business in the middle of a production run, stranding the factory with an inventory of now-unwanted product in search of a new buyer. Or, a key supplier in the supply chain may suffer a catastrophic loss of a capital asset in the wake of a natural disaster.
But apart from exogenous events like these, it’s up to a manufacturer to ensure that demand forecasting and production planning are as buttoned down as possible.
The Old, Error-Prone Production Planning Method
Eric Satterthwaite, V.P. of Sales with Gerent, a top Salesforce consultation and implementation partner, says many manufacturers forecast demand after its representatives meet with a given customer to determine which products and what quantities that customer expects to need in the coming year.
“But that agreement is not often in blood, so to speak. It’s verbal and non-binding,” Satterthwaite explained in an episode of Gerent’s Ahead of the Curve podcast.
“The company then starts to plan based on that high level agreement. The materials have to be ordered and that stuff needs to be warehoused somewhere. Meantime, the company’s expecting the customer to take the finished product.”
According to Satterthwaite, this is the point where the demand forecast begins to show cracks.
“It’s now the following year, production is moving into full swing and you’re looking at actuals,” he said. “You’re trying to determine how to break out that production order over a 12-month period. You want to stay on schedule, but you discover the customer is buying more than they said they would last year when they met with your sales rep. Are you now going to run out of product? Can you successfully increase production?”
Unfortunately, the opposite can also occur. Well into the production year, the manufacturer might suddenly realize the customer isn’t buying nearly what they said they would — which will leave the company with a lot of unsold product. The only choice then is to sell at pennies on the dollar and swallow the loss
Data Drives Strategic Decision Making During Demand Forecasting
It’s clear how vital accurate demand forecasts are. To arrive at a forecast that can safely form the basis of a production plan, a manufacturer must have access to the latest customer data at all times.
That, said Satterthwaite, is where Salesforce’s Sales and Manufacturing Clouds play a key role. Sales Cloud provides the ability to track and manage customer communications and, through Service Cloud, handle service level agreements, as well.
More than that, however, all areas within the manufacturing firm can see the customer’s account and profile, thus putting an end to siloed information stores. Through the Manufacturing Cloud, account managers have the latest and most comprehensive view of the customer at all times. Any changes are instantly visible and the appropriate groups within the company are notified immediately; account planning and forecasting are further unified for greater transparency and collaboration.
Manufacturing Cloud Is a Powerful, Versatile Tool
The new Manufacturing Cloud provides visibility into a customer’s complete book of business, from current business, run-rate business and any new opportunities, to facilitate the most accurate forecasting and production planning possible.
As a result, the manufacturer attains a more stable position and — since both Sales and Manufacturing Cloud can be integrated smoothly with various ERP and Order Management Systems (OMS) — all suppliers can also be brought into the picture. Thus, the entire supply chain is strengthened and able to operate in a fully unified manner.
More than 12 million people in the United States are employed in some form of manufacturing, an industry which contributes almost two trillion dollars to GDP. The sector is critical to the health of the nation. When manufacturers are able to generate sales forecasts and production plans that accurately reflect a customer’s needs, not only are their individual bottom lines enhanced but the entire manufacturing sector is, as well.
Gerent is a company highly regarded by Salesforce as one that knows Salesforce technology intimately. So, we invite you to contact us and learn more about how you can build accuracy into your forecasting.