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The Manufacturing Plan
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This presentation will explore the significant potential impact of a well planned and carefully executed forecasting process on the ability of Manufacturing to serve the cus­tomer. It will show why the Manufacturing Planning Process is critical to the maintenance of this capability, and how the forecast is critical to this process. The target audience for this presentation is the user of the forecast more than the people who are the "experts" preparing the forecast.
The relationship of the forecast to Sales and Operations Planning and Master Production Scheduling as well as the impact of selecting and using valid source data is dis­cussed. The importance of understanding the need for selecting appropriate forecasting methods and the selec­tion criteria for choosing the forecasting methods are covered.

Why we must avoid overreliance on quantitative methods and the need for using appropriate qualitative methods are emphasized. The concept of "Cost of Forecast Error" is introduced. Given that forecasts are either "wrong" or "lucky," and that forecasts are more accurate over a shorter horizon, the benefit of improving response to actual de­mand, as received from the customer, is a critical element of a successful manufacturing plan.

Forecasting—Some Thoughts

Much has been written and spoken about forecasting. A basic truism, in my opinion, is:
TO BE SUCCESSFUL WE MUST PLAN FOR SUCCESS

There is a direct correlation between the quality of the planning and the results of the execution. Good plans poorly executed will have poor results. Poor plans well executed will have poor results. Only good plans well executed will yield the quality results we must have for effective execution. The marketing forecast is a key ele­ment of having a good plan. In fact, all PLANS start with a FORECAST.

Sayings pertinent to forecasting, range from:
"A PRUDENT MAN FORESEES THE DIFFICULTIES AHEAD AND PREPARES FOR THEM. THE SIMPLE­TON GOES BLINDLY ON AND SUFFERS THE CONSE­QUENCES." —Proverbs 22:3
to the saying by Charles F. Kettering:
"MY INTEREST IS IN THE FUTURE, BECAUSE I'M GOING TO SPEND THE REST OF MY LIFE THERE."
It is the appropriate integrated forecasting system that can greatly improve our "Quality of Work Life."

Why Do We Forecast?

Successful companies have good practices in defining their Strategic Intent (their vision) and converting that intent to a Strategic Plan. A key to going from intent (vision) to plan is the marketing forecast. Peter Drucker has written:
"STRATEGIC PLANNING DEALS WITH THE FUTURE EFFECTS OF PRESENT DECISIONS."

Another way to look at the purpose of strategic planning, and therefore the purpose of forecasting, is to make plans and decisions to "INFLUENCE THE FUTURE FAVOR­ABLY."

While a key measure of a company's success will be the bottom line, a key factor to maintaining and improving the bottom line is the ability to satisfy the customers' needs and expectations. Therefore the forecast must go beyond the finance driven factors of dollars and volume. To satisfy the manufacturing needs we must include product mix, de­mand patterns and effect of present and anticipated com­petitive pressure.

To get a fuller understanding of the impact of forecasting on the business (Sales and Operations) Plan, let us exam­ine the key issues dealt with in the business plan:

• How do products, markets rank now?
• Which products are declining? How fast?
• Which products are growing? How fast?
• Which products are mature, stable?
• What new products are needed?
• What actions are needed?
Answers to all but the first and last question will be in the marketing forecast. The last question, the most critical, will be based on the answers to the prior questions.

The answers to why we forecast are:

1. To anticipate the future
2. To provide, (or prepare to provide), capacity and material
3. To shorten response time
It is the need to shorten response time which becomes more and more important. It becomes more and more important to become proactive and move away from being either re­active or to protect uncertainty of demand with inventory.

To be Continued


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