Spring 2010 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

are high-level forecasts of total unit sales, although sometimes it is helpful to go one level down and forecast by product families. The operations people provide forecasts of capacity each month for the next 12 months; product engineering brings the plans for new product introductions; and finance translates the demand and production requirements into financial terms of revenue, expense and working capital requirements. Through a series of formal, tightly scheduled meetings, the customer demand is matched to production capabilities. On the final day of the monthly process, the executive SOFP meeting is chaired by the most senior person in the organization — often the president or CEO — and a company-wide game plan is developed. Everyone in the organization can buy into this game plan because it has been developed cooperatively. The financial planning outcome of the SOFP process is to update budgets each month, thereby largely eliminating the wasteful annual budgeting choreography in which most companies engage. Calculating short- term month-end results also decreases the need for month-end reporting processes. Days 1-2: Demand Planning — Provided by sales and marketing and the new product development team. Looks closely at the prior month’s actual versus plan amount at the product family level and revises the next month’s forecast based on the latest available data regarding demand. Days 3-4: Operations Planning — Provided by the production operators using the demand planning provided by sales and marketing as a guide to planning for the following month’s production needs. A TYPICAL EIGHT-DAY MONTHLY PLANNING PROCESS WOULD INCLUDE:

Day 5: Cross-Discipline Planning Meeting — Attended by sales and marketing, new product development, operations, finance and other key operations people. These parties reconcile demand and operations planning, taking into account improvement initiatives, planned new product introductions and capacity restraints. Days 6-7: Financial Planning — Prepared by the finance group. Update rolling budget for the next 12 months and translate financial impact of demand and production changes on the business. Day 8: Executive Meeting — Attended by the CEO, president or equivalent. Operational decisions are finalized and the “game plan” is approved.

Questions? Contact:

Mike Lewis, CPA Partner-in-Charge Manufacturing & Distribution Services Group 314.290.3391 mike.lewis@rubinbrown.com

38 u spring 2010 issue