Immature Driver Models Undermine Rolling Forecasts in Manufacturing

Rolling Forecasts and Driver-Based Planning are management approaches that have gained a lot of attention of late. You don’t have to look too far to see the evidence. Do a Google search on either topic and you will get thousands of results.  The problem is that, when it comes to manufacturing, the approaches described in these articles often describe immature versions that don’t work well.

 

The primary focus of rolling forecasts and driver models is on generating a profit and loss statement.  More mature ones, however, also support scenario planning that can assess the impact of outlying scenarios across multiple legal entities.  Better process enable manufacturers to do the following:

  • Support direct cash flow forecasting processes that forecast cash by vendor and customer
  • Predict how strategic sourcing activities affect direct and indirect costs
  • Quantify potential capacity constraints on all aspects of the business
  • Quantify component variances between scenarios, such as volume, mix, price and productivity
  • Quantify how changes affect employee productivity at an enterprise and department level


Achieving the above are signs that your rolling forecast and driver models are delivering tangible business value in your organization. Conversely, the inability to effectively to do so is an indicator of immature processes and models.  Many invest in financial planning, budgeting and forecasting technology thinking that these tools should be able to support these needs,  but unfortunately this is often not the case.

The article noted below and the associated video go through in detail why manufacturers are not getting the results from these investments and how they can avoid the missteps of others.
Article: Can CPM software handle rolling forecasts?

Video: Driver Based Planning in Manufacturing - Maturity Model

Immature processes and models are holding back what could be real and meaningful analysis of your business. If you are not able to deliver on the above, it is time to pause and re-evaluate your processes and the supporting systems

What are your thoughts? Is your process where you want it to be?

 

Tagetik unified budgeting, planning and forecasting

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