Comments on: 4 Financial Metrics Every Demand & Supply Planner Should Know

By: Mark Lawless

Mark Lawless — Wed, 27 Jul 2016 00:36:09 +0000

Being able to relate demand planning and supply planning concepts to current and future financial plans and performance results can really help in getting the information used within the organization. It also aids in being able to make the case for processes, system investments, and the necessary organization to aid the company in achieving its goals through the efforts of demand and supply planning.. A good working relationship with the finance and accounting groups can help in this regard. Ultimately, being able to effectively use the financial concepts in our efforts will increase the value of our efforts and work product to the company.

By: Daniel Druwe Araujo

Daniel Druwe Araujo — Thu, 21 Jul 2016 16:19:00 +0000

Very good summary of the subject, congratulations!
It seems to me that a more prospective approach should be emphasized, focusing on the translation of physical demand forecasts and supply plans into financial plans, and the use of such financial projections to help make decisions about planned demand and planned supply.
Forecasts are just the start of the planning process (an important start). Forecasts need to be converted into Demand Plans, the difference being that the later represent what the whole organization is committed to sell, not just what we forecast the market will buy.
Demand and Supply planners need to see their demand and supply plans as the most important factors of what the organization will have as revenues and as costs, therefore as profits.
Actual (past) financial metrics can teach us much and orient changes to our future actions. But actively understanding how our demand and supply planning actions will affect finance and taking an active responsibility to shape our demand and supply plans in a way that they produce the desired financial results is a necessary evolution for demand and supply planners.
Projected financial metrics are needed for this progression to happen.

By: Sports Guy

Sports Guy — Thu, 21 Jul 2016 15:15:16 +0000

Most of those concepts mentioned are *accounting* definitions, not finance concepts, and are related to a company’s accounting statements. These accounting concepts are all backward looking, versus financial concepts which are forward or future looking.
Planning is a financial concept because it deals with the future and future goals, and that is where “finance” comes into play. However, many of these S&O improvements become one time events, making the accounting history look good in the present, but more difficult in the future. Also, as the US economy continues to transition more to a service economy, labor becomes a sku, and labor skus aren’t as standardizable as product skus. given the wide variety of human std deviations in behaviors.