There’s an old saying that 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 plan like crazy and, yet, still fail to meet forecast demand or see production plans go up in smoke.
In fact, the greatest challenge for manufacturers and their supply chains is to accurately forecast demand because of the immediate knock-on effect with production planning.
Granted, some things are outside the control of manufacturers. 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 due to an act of God.
The Old, Error-Prone Method
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.
Eric Satterthwaite, V.P. of Sales with Gerent, a top Salesforce consultation and implementation partner, says many manufacturers forecast demand, based on the following scenario: a salesperson meets with a customer to determine what products and what quantities that customer expects to need or want in the coming year.
“But that agreement is not often in blood, so to speak. It’s verbal and non-binding,” Eric explains. “The company then starts to plan, starts to build or make or put together and process whatever it is that has to happen 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.”
This is the point where the demand forecast begins to show some cracks. “It’s now the following year, production is moving into full swing and you’re looking at actuals,” Eric continues. “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 suddenly realizes the customer isn’t buying nearly what they said they would and the company is left with a lot of unsold product. The only choice then is to sell at pennies on the dollar and swallow the loss.
Date Drives Decision Making
It’s obvious how vital accurate demand forecasting must be. In order 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, says Satterthwaite, is where Salesforce Sales Cloud and Manufacturing Cloud play a key role. Sales Cloud provides the ability to track and manage customer communications and, through Service Cloud, the 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 that only certain groups can see at any given time. Through Manufacturing Cloud, account managers have the latest full view of the customer at all times – complete with the most current data. Any changes are instantly visible and the appropriate groups within the company notified immediately. Account planning and forecasting are unified for greater transparency and collaboration.
Manufacturing Cloud: Powerful, Versatile
The new Manufacturing Cloud provides a visibility into a customer’s complete book of business – current business, run-rate business and any new opportunities – in order to permit the most accurate forecasting and production planning possible.
So, the manufacturer is in 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 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.