Christmas Puts Budgeting & Forecasting In Focus For Food & Beverage Manufacturers

Christmas Puts Budgeting & Forecasting In Focus For Food & Beverage Manufacturers

By Sonia Johnson on Dec 5, 2017

Australian food & beverage manufacturers look to better budgeting and forecasting at Christmas time

While many of us may be winding down coming up to Christmas, it’s a busy time of year for food and beverage manufacturers in Australia, many needing to accommodate for fluctuations in demand.  Accounting for seasonal impacts and demand fluctuations can be a make or break decision, putting enormous pressure on production and the supply chain.  Unfortunately for many, Excel is still rife in managing enterprise budgeting and forecasting decisions.  Here we explore how the right enterprise budgeting, planning and forecasting software can deliver greater accuracy and agility for finance teams and the business as a whole at this busy time of year.

First we need to understand why planning, budgeting and forecasting is fundamentally difficult for manufacturers:  

  • These businesses tend to have functional organisational structures, as opposed to business-line structures where the inherent consistency of plans is easier to ensure

  • There’s the need to manage large amounts of detail and integrate disconnected production, labour, sales and operational planning with financial planning, cash flow, modelling and forecasting.

  • Finance teams are working with product and customer rich hierarchies that need to be catered for. i.e. budgeting and forecasting volume / revenue at SKU, product, category level and by various cuts of the customer (national, region and state).

  • The fact that budgeting is often a distributed process across multiple sites with many contributors who need a simple way to input into budgets and plans

  • There’s an overreliance on standalone systems or Excel to manage budgeting and forecasting processes, this has the risk of relying on one or two key people, draws out the planning process and makes it difficult to enforce the use of drivers as managing versions and forecasting more regularly is laborious.

Not surprisingly, there’s now a strong emphasis for finance and operational teams in food & beverage manufacturers to leverage more advanced techniques for better sales and operational planning (S&OP) that’s closely entwined with the overall financial plan of the company. Accurate demand planning will better anticipate demand and associated production impacts, promoting advanced shelf-life management and more intelligent forecasting. Without it, supply chain coordination problems can lead to frequent changes in production schedules, rushed transfers and shipments in distribution, excessive stock, erratic levels of customer service, lack of visibility into future demand, and inventory in the wrong place and at the wrong time. Not a good look at this, or any time of year.

Here are five key areas where sophisticated budgeting and forecasting software like Host Analytics can help:

1. Better Integrate Revenue, Sales & Operations Planning (S&OP)

Manufacturers can use budgeting and forecasting software to plan and forecast revenues automatically using business drivers like unit price, machine hour capacity, volume and others. Revenue planning can facilitate demand and SKU forecasting so resources can be directed to the right products at the appropriate times.

Revenue Planning should be integrated and balanced with the cost side of planning to forecast realistic contribution margins and profitability, while being able to quickly understand actual versus budget comparisons. Ideally F&B manufacturers should look to a single platform that supports S&OP, linking to the financial plan to align on a single view of the numbers. This should include modelling capabilities that support non-monthly time periods (as S&OP can be typically on a weekly granularity versus monthly with financial) and a highly flexible interface that caters to the needs of different audiences (Sales, Production Planning etc.).

Business rules should link sales and production assumptions and resulting volumes. This is then fundamentally integrated with the financial planning model so outcomes of S&OP flow into the financial models for the rest of the financial forecasting. This achieves accountability for the sales forecast and a direct link with the production plan to better manage peaks and troughs in demand.

2. Volume Driven Labour Modelling & Planning

Detailed labour planning should be volume-driven, so it can flex the workforce to account for demand and boom cycles and different employee types. Impacts should be modelled and often many budget versions can be required during the financial year as changes are being made, then this needs to bridge back to the original budget.

Tools such as Host Analytics allow creation of business rules that can be embedded in the planning process and that are dynamic with sales volume as the sales forecast changes. This helps managers plan for additional shifts and / or the hiring of additional fixed headcount while providing a view of the likely shift penalties / overtime that they may incur under various sales forecast / production assumptions.

3. Be Prepared: With Multi-dimensional Planning & Sensitivity Analysis

Multidimensional planning capability will allow manufacturers to accommodate their need for highly dimensional planning and phasing methodologies, to phase budgeting and forecasting data based on revenue, a 4-4-5 calendar, production, product, sales or others. Adjustments should be able to be made at any organisational level, with an unlimited number of forecast scenarios. As forecast accuracy is paramount for manufacturers, teams should be able to easily review forecast on forecast changes for greater visibility with the budgeting and forecasting software. The granularity of forecasts should also be able to be varied, such as a move to more regular, rolling forecasts if required.

Many cloud-based corporate performance management platforms like Host Analytics provide speed-of-thought multi-dimensional sensitivity analysis, in a flexible environment to allow finance and operations teams to model an unlimited number of scenarios such as volume or demand, currency/commodity price fluctuations, wastage and trade promotions to instantly understand potential impacts on financial and non-financial KPIs. 

4. Support Complexity of Selling Expenses  

During busy periods, having a firm grip on selling expenses becomes critical, however for some can be quite complex.  This can be simplified by using budgeting and forecasting software that supports many kinds of drivers of selling expenses (fixed amount, % of sales, $ per unit etc.) which when configured provide a high level of insight into the financial impact of various marketing initiatives. These types of expenses are often modelled which is then used as a tool to set appropriate marketing spend.

5. Automate Budgeting and Forecasting Processes  

To better serve fluctuations in demand, planning and forecasting processes that support this need to be agile, automated and ensure accountability.  Budget comments and detail should be linked to those items that end users are accountable for and which they control.  Accessibility to input assumptions and the ease of use of any software interface used to manage these processes should be an important consideration, especially in a decentralised planning environment.

Role-based security should control which aspects of the plan people see while centrally controlling those you don’t want changed such as unit costs and/or prices.  Aspects like workflows, audit trails, real-time updates to shared models and inbuilt collaboration with rollback to earlier budget versions, can make it all simpler to manage a distributed planning process that spans teams and geographies.  This removes errors and ensures changes are tracked through the budget process.

Simon Miks, the GM Finance at Australian food manufacturer Beak & Johnston speaks in this short video about how they have transformed enterprise planning, close and financial reporting using Host Analytics. 

For more information on how to build a competitive advantage with better budgeting and forecasting within the manufacturing sector in peak times like the Christmas period or any period for that matter, download the whitepaper below.

Download Whitepaper

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Written by

Sonia Johnson

Sonia Johnson heads Inside Info's Marketing team, as an experienced B2B marketer, having launched and built both the Qlik and Host Analytics brands in the Australian market. Sonia has 20 years' experience working within the IT and telco industries, having worked for IBM and Vodafone, the last eight years have been focused within the business intelligence and corporate performance management sectors.

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