Most of the small, emerging organizations are working on the current month or week or day and may not have much clarity about the immediate medium term. This practice results in the scenario "always busy" or "firefighting" mode to serve the customers all the time. But as a business, it will lose the long sight vision or growth potential.
One of the ways to come out of firefighting mode is to enhance the planning window.
Planning Window :
Instead of planning for the current month, extend the planning horizon for the next 3 months so that the business head and the organization will have visibility about the sales potential, working capital requirement to buy Raw material, capacity availability vs. requirement. Also, this enhanced planning will give more time to RESPOND to uncertainty.
Tool for enhancing the planning window:
The simple, yet powerful tool is 1+3 planning format. This could be used for sales projection or forecasting, working capital planning, or even for profitability projection.
For example, let us take the case of sales projection into a 1+3 format.
In a 1+3 sales format, you need to fill the data with sales projection for 1+3 months timeframe.
1 - a month is the current month, mostly firm / confirmed order
3 months can be for the next 3 months projection with firm/ confirmed order and then tentative orders
Advantages of extending planning horizon :
1. When you see your sales projection data down the line 3 months from now, you will come to know the order position vs. target gap. That will give you response time to reach out to existing customers for more orders or pitch-in new customers for new orders
2. Since any new order requires time for approaching the right customer- processing inquiry - price finalization- proto proving- getting bulk order, this 3 months time horizon will give the flexibility and sufficient response time
3. If you know the projection for the next 3 months with some level of accuracy, that will help you to utilize your capacity well, manage the cash flow proactively.
The thought process of the business head must be proactive and beyond the current day or month for sustainable growth. This 1+3 projection will help to stimulate your thought process!
One of the ways to come out of firefighting mode is to enhance the planning window.
Planning Window :
Instead of planning for the current month, extend the planning horizon for the next 3 months so that the business head and the organization will have visibility about the sales potential, working capital requirement to buy Raw material, capacity availability vs. requirement. Also, this enhanced planning will give more time to RESPOND to uncertainty.
Tool for enhancing the planning window:
The simple, yet powerful tool is 1+3 planning format. This could be used for sales projection or forecasting, working capital planning, or even for profitability projection.
For example, let us take the case of sales projection into a 1+3 format.
In a 1+3 sales format, you need to fill the data with sales projection for 1+3 months timeframe.
1 - a month is the current month, mostly firm / confirmed order
3 months can be for the next 3 months projection with firm/ confirmed order and then tentative orders
Advantages of extending planning horizon :
1. When you see your sales projection data down the line 3 months from now, you will come to know the order position vs. target gap. That will give you response time to reach out to existing customers for more orders or pitch-in new customers for new orders
2. Since any new order requires time for approaching the right customer- processing inquiry - price finalization- proto proving- getting bulk order, this 3 months time horizon will give the flexibility and sufficient response time
3. If you know the projection for the next 3 months with some level of accuracy, that will help you to utilize your capacity well, manage the cash flow proactively.
The thought process of the business head must be proactive and beyond the current day or month for sustainable growth. This 1+3 projection will help to stimulate your thought process!
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