In one of our recent customer newsletters, we shared information with you about the five things your annual forecast influences. Your forecast is one of the most crucial pieces of information we need from you.
Your business forecast drives our business planning each year. It allows us to plan our production capacities, capital investments, operational changes, staffing, raw material supplies, and logistical resources. Your forecast gives us the information we need to prepare these items so we can effectively and efficiently support your production needs throughout the year.
We also need to know when you may anticipate or actually experience changes to your forecast. To help you understand the impact these changes could have on our business, we outlined certain factors to consider that can change your forecast.
The next step we would ask of you is to compare your forecast against your actual purchase orders. If the two are different, take note of what changed in your forecast and let your account executive know.
We realize factors like political sanctions or tariffs or even the weather, can unexpectedly impact your purchasing plans. If you need to make adjustments, communicate any changes with your account executive as soon as possible.
Forecast changes, either positive or negative, can affect many areas of our business:
- Raw material supplies – an overabundance requires finding new work or added inventory costs; a shortage limits capacities for other customers
- Spare capacity – no spare capacity limits our ability to take on any additional or new production opportunities
- Business plans – directly affects building, equipment and employee needs
- Data analytics – changes interpretation of our production volumes and needs
- Logistics – flexibilities here are determined by other parties
Our capacity levels are set to be a direct reflection of your forecasts. We set capacity to an optimum level where we are busy enough but we have breathing room for last-minute requests.
If capacity is full and work is flowing overboard, we may need to implement the call for overtime. Or the opposite could happen. We could have new equipment idled by an unexpected order delay—essentially, losing money. In the worst case scenario, we could be pressed to reduce our workforce. Any one of these outcomes could cause a negative impact on our budgets, and our business.
During slower times, however, we take full advantage of the chance to try new things. We constantly seek continuous improvement opportunities for every manufacturing operation we perform. We created a new production cell design for one customer that increased product flow and employee ergonomics. Where it makes sense, we continue to add robotics and automation technology to our machining cells, increasing our production capacities, while creating opportunities for our employees to learn new skills and grow their technical knowledge.
The sooner we become aware of your forecast changes, the sooner we can work on creating an alternative solution to make sure we are able adjust to meet your new needs. Sharing this information with us, also allows us to make decisions about any necessary schedule or material changes that may need to happen on our end.
Check. Check. Check.
When was the last time you compared your purchase orders to your forecast? Has it been longer than three months? Perhaps now is a good time for a forecast check-up. Schedule time for yourself and your account executive to review your recent purchases. Discuss any differences in orders versus forecasts, the (potential) causes and anything you anticipate changing in the next few months.
In fact, make it official and choose a recurring milestone, such as a specific time frame (preferably monthly), production quantity amount, or other criteria, to indicate it is time to check your forecast.
Having your forecast is key. When your forecast changes and you tell us, we will be better able to meet your production needs now, and in the future.