Five Critical Things Your Annual Forecast Influences
At this time of year, your suppliers will usually ask for your business forecast for the upcoming year. Are you prepared to provide this information, or do you wonder why they need anything besides your purchase order? While the supplier will understand your needs at that time, it is important not to underestimate the value in helping them prepare to fill your orders before your purchase orders arrive.
Getting forecasts from customers is much more than a nice-to-have mindset. It is crucial. It allows us time to prepare for your manufacturing needs for the coming year, and prepare in advance to efficiently, and effectively, support them.
Forecasts drive…
- Capacity (No capacity = No product)
During annual forecasting, your Alexandria Industries’ contact will ask you the following questions:
“How much do you plan to grow in the next year?” Some customers anticipate 5, 10 or 20 percent, while others may struggle to understand the direction their market is heading over the next 12 months.
“What significant changes do you expect to see in your market?” Alexandria Industries’ supplies components to many different markets. Without having open dialog about your expectations, it can be a challenge to make adjustments and continue to deliver our best service. Key changes to your business, such as a planned acquisition, selling or shuttering business operations, or in-house service changes, can play a big role in your future capacity needs, thereby influencing our capacity.
“Will you be introducing any new products?” This can affect our capacity, and nothing is more frustrating for you than waiting for your supplier to launch a new product. If we know this in advance, we can be prepared to supply your products, contributing to your efforts to be first to market, and generating greater opportunity for you to win more market share.
If you launch a new product, “Are you planning a slow and steady production ramp-up?” Your answer will help ensure we have capacity for your component manufacturing.
“Do you have any products that will be coming to their end of life?” We understand the importance of developing a fully executable plan to phase out legacy product, meeting the target termination date, and ensuring replacement parts are available for your customers. Through open communication and clear expectations of both organizations, we can help manage your end-of-product lifecycle to ensure a smooth transition.
- Capital Investments (Wrong equipment or lack of manufacturing space = No product)
Every year at Alexandria Industries, we develop a capital investment plan for all of our facilities. Our plans range from new services and machines to equipment upgrades and nearly everything in between. We methodically and cautiously plan investments, making sure no capability or capacity need goes unaddressed. We also eliminate unnecessary investments based on what customers no longer need. Your accurate forecast helps us determine our capital needs for the coming year and future.
Increased demand for our services, or changing products, sometimes require additional manufacturing space on our end. Adding space is exceedingly expensive. The cost of building material, land, and meeting stringent building codes for commercial expansion, are critical factors we consider when planning our services and ways we deliver your product.
Visit any of our facilities and you will see the dynamic way we layout our plants to utilize virtually every square-inch for manufacturing. When we no longer have an inch to spare, we take steps to expand. Two recent building expansions adding approximately 50,000 square-feet of manufacturing space, allows us to accommodate the growing needs of our customer base. Not having forecasts and knowledge of your plans before purchase orders arrive, could challenge us to respond accordingly, and fulfill your orders.
We work diligently to understand your product manufacturing needs. We plan accordingly, and as appropriate, we incorporate the most desirable capability to serve you best. Forecasts have paved the way to our ever-widening range of capabilities, and enhancing our vertical integration approach within the marketplace.
- Operational Changes (No skilled employees or outdated systems = Reduced quality and delayed products)
Manufacturing employees continue to grow older with more of them reaching retirement age. Like many manufacturers, we are seeking employees to fill both the soon-to-be-vacant positions, as well as new positions due to company growth. It is a growing challenge for companies to find people willing to pursue careers in manufacturing. With all the variables, checks and balances, it simply takes more time today to fill positions and ensure we have the right amount of skilled employees with the right qualifications. Being able to prepare ahead of time, assures us that we have the proper workforce to manufacturer quality components for our customers.
We know that properly trained individuals are key to our success. Our employees are more than working-hands. They are fully educated to manufacture your quality components. With accurate forecasts, we will have time to train staff to fulfill your purchase orders.
It also can be difficult for organizations to be successful without having the proper systems to manage their operations. With constant advances in technology, existing enterprise business systems require regular updates, upgrades or replacement, or new system offerings need to be considered, and implemented. When customers provide accurate forecasts, we can manage our business systems to minimize necessary inconveniences.
- Raw Material Supply (No raw material supply = No products and/or increased prices)
Alexandria Industries takes a serious and methodical approach to sourcing raw material supply. We engage in extensive research and lengthy negotiations. We make sure our material supplies will be sufficient, priced accurately, and high quality. We sign contracts for a year's supply of aluminum, which we are required to take regardless of customer need. Inaccurate or non-existent customer forecasts make estimating our annual supply needs, nearly impossible.
A random spike to meet one customer’s production needs will have only a minor effect on supply. If the needs of multiple customers change simultaneously, or markets grow or contract, we may experience substantial material supply overages or shortages. Neither is ideal. Given daily fluctuating material prices, shortages or abundances could affect your product costs.
- Logistics Resources (No logistics = No delivery)
Even if Alexandria Industries was able to adjust to all other changes in production, without proper logistical resources, product delivery costs may increase and delivery times may be extended. Having your annual forecast allows us to plan for our customers’ logistical needs, avoiding expedited delivery charges or late deliveries.
When you receive that call, you know, the one from your account executive at Alexandria Industries, asking about your annual forecast, understand how important your answers are. If anyone tells you forecasts are a nice-to-have, educate them on why this is not true. Explain that without an accurate forecast, they could cost their business money, time, or jobs.