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Couple of weeks back I did a detailed discussion with few senior people of a media company where they discussed their need to analyze the impacts of any change in the external environment. This prompted me to focus on this topic for this blog. The media company was explaining how in their business, an external event could have a great impact, and that’s means a complete change in their business plan. Though the media company plans very exhaustively, it is essential for them to have a more adaptive planning approach a.k.a event based planning. For example, they had planned coverage of the Olympics very well with budgets allocated for the same, but what they had not covered was event such as a government fall, or terrorist attack, that needs attention and coverage. So the management wants an immediate impact assessment of such events and spending/revenue potential on coverage of such events have to be quickly assessed and incorporated into plans.

 

Event based planning is not just a phenomenon of media company, but every business needs to plan and re-forecast based on events. Some events may impact directly such as the media company example that we saw above, others could be indirect impacts such as oil prices increase affecting the manufacturing costs, competitor action affecting sales revenue, merger and acquisition affecting internal plans etc. C level executives always want adhoc analysis reports to ascertain the impacts of such events and the analyst spend time pulling out data, but many organizations do not have an efficient way to build this into the existing plan, and build an impact scenario. Often analysts leverage Managing Spreadmarts through SAP EPM to get to such impact analysis. Having an event based planning approach built into the planning and re-forecasting process would help achieve this significantly.

 

Enabling frequent re-forecasts

In one of the recent report that was published by Aberdeen group survey, the aspect of frequency of re-forecasts has been highlighted. It would be good to map the frequency of re-forecasts to event based planning. Best In class companies (42% of them) run re-forecast process every month. This is an ideal frequency to relook at the plan and incorporate all the events that have occurred in business. There is also a need to do re-forecasting On demand, but the best practice approach would be to follow a process of re-forecasting where all the events are considered and incorporated into this process, rather than reacting to each of it on an adhoc basis. This approach allows for more collaborative approach to handling events where decisions are taken after  involving cross functional teams who are involved in the re-forecasting cycle. This also ensures that day to day activities are not affected. But we cannot discount the fact that some events needs immediate attention as it may likely to have significant impacts and that is where emergency meetings are called and impact analysis need to be done On demand. But these events have to be significant enough. If you notice in the below chart that On demand re-forecast happens even in about 20% of best in class companies. So it indicates that probably there were significant events that happened or the industry in which the company is in business is vulnerable to such events, and has direct impacts.

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To ensure that such a re-forecast process can be put in place and at the same time support On demand adaptive process request, every company should look at a Enterprise Performance Management strategy that allows for ability to incorporate business events into a closed loop performance management cycle. This is where the combination of Empower the Business User through the value of SAP – Business Objects combine  provides necessary solutions across Enterprise Performance Management, Governance Risk & Compliance  as well as Business Suite to ensure the business users can incorporate the events into their business both in a process centric mode as well as on demand.

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  1. Shailesh Unny
    I agree that very frequently several companies have cases where certain events can cause them to change their forecasts very significantly. However should this not really be built into the design of the forecasting application? Is it correct to expect a tool to handle this? I believe eventually you will always come across a situation where the tool will fall short.

    A very crude example of this could be for e.g having a list of products that you generally forecast against. However some event occurs in the market which causes you to change your product line and revamp it completely. You should in such a case build your planning application such that the products to be forecasted are pulled from a source which the business user can directly maintain.

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