The difference between adequate and excellent sales forecasting and demand planning can make a huge difference in a company’s competitiveness and market position. However, the problem many companies are facing is not only that the two processes are not necessarily seen as interrelated, but there is also a lack of systems which utilize available market data and information. As a consequence, sales forecasts and the demand plans which should be based on these forecasts are not very accurate or timely, and the responsibility for managing the process and providing the plans often is left to people not directly in touch with buyers and customers.
Ineffective use of information and lack of technology have tangible impacts as both over- and under- sales forecasting are detrimental to the financial health of a company.
Too low sales forecasts result in lost demand, which negatively impacts the top line in sales revenue. To recover the lost sales, companies have to make unplanned investments, which costs money. Some obvious costs are procuring components at higher costs and/or using unfavorable logistics options (air shipments instead of truck, for example). Shortages also increase lead times and backlogs, delaying customer deliveries, which negatively impacts customer satisfaction.
Over-forecasting, on the other hand, leads to fire sales that erode the profit margin. In some cases, the result is plain loss because products have to be sold at below cost or even scrapped. Obsolescence is not uncommon in the case of over-forecasting. Warehouse cost, holding excess inventory and not being able to realize higher-profit opportunities due to manufacturing limitations are additional cost.
Too often, companies place a high priority on optimizing sales, revenue and profitability, and too little emphasis on optimizing production, logistics and fulfillment – all of which are vital to long-term success.Very few companies take full advantage of the improvements that IT can provide in their sales forecasting and demand planning activities. The good news is that IT can enable them to collect, analyze and utilize a much greater variety of information than ever before.
SAP Integrated Business Planning (SAP IBP) provides very comprehensive sales planning and forecasting and demand planning tools, among other functionality. However, the most effective way for the field organization to do their sales forecasting is not having to use a separate application which is primarily designed for operational functions. It only makes logical sense to integrate sales forecasting into the tools they use to perform their daily tasks.
Although there is currently no ‘native’ integration between SAP IBP (Sales Forecasting) and SAP Cloud for Sales, a very comprehensive and intuitive solution is available though SAP solution partners. Sales representatives can now access simple and easy to use planning sheets directly from their customer information page – no need to search for or to configure a planning sheet.
The benefits are obvious:
- primary responsibility for the sales forecast is with the field organization
- ease of use increases forecast frequency – becomes part of the daily routine
- integrated system speeds up process – no need to consolidate spreadsheets across the organization
- the demand planning process spans the organization and cross functions
Sales representatives don’t have to separately log into a planning and forecasting tool which usually is designed for power users (demand planners) in operations. The planning sheet is easily accessible and shows all necessary information:
- contextual planning directly from the customer information page
- system provides monthly or quarterly sales history by product
- system provides statistical forecast, based on a variety of rules and algorithms
- product sales are sorted in declining order, so most important products are displayed first
As sales planning is directly integrated into SAP Cloud for Sales, sales representatives can enter market and demand information anywhere, anytime as part of their daily routine:
- sales representatives can do joint planning with their customer
- browser-based and on mobile devices, such as iPads or Android devices
- quick and easy – when done, a simple ‘save’ synchronizes data with the IBP backend
- accessibility, integration and ease of use allow for more frequent planning and a speedier process