Understanding Sales & Operations Planning

Understanding Sales & Operations Planning
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Sales and operations planning is an important factor in your business and how it functions on a day-to-day basis. Trends in sales will always have a direct impact on your operations planning. A business will not be able to move forward if it does not have a detailed plan in place that accounts for increases and decreases in sales and productivity. If you have a seasonal business, it’s understood that your business will thrive at specific times of the year and dramatically slow down during the off-season.

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Forecasting Your Needs

Sales and operations planning involves learning how to forecast the future needs of your company. If you plan on continued growth, you need to understand what patterns and trends will affect your business. Once you identify trends, you can begin to create an operations plan that will allow your business to grow, even through the leanest of times. Proper supply chain planning gives you an opportunity to prepare for the future. You will know when to increase your purchases so that you can build an inventory that will support your business as sales increase.

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Identifying Trends

If you want to identify strong trends and patterns within your business, review your purchase records and sales for the past five to seven years. By looking at your trends in sales, you will be able to determine when your income is the highest. During this time, you can purchase what you need for the business quite effortlessly. It is how you manage your profits at this time, however, that will determine how much you can purchase during your slow time. Padding your inventory or maintaining "survival" funds that can get you through your slow time is important when you start to identify the trends and patterns that affect your business.

Constant Evaluation

Even though you study your past trends, you will need to constantly evaluate your company's growth. If you want to truly keep an eye on your company's growth and take the necessary measures to ensure its continued growth, you have to constantly evaluate your day-to-day operations. Evaluate daily production rates. Use software that tracks your in-store and online sales. Compare your current sales with those over the past year. Look closely at changes and try to identify what is going on and what is causing the fluctuations.

Building Your Supply Chain

When it comes to maintaining adequate inventory and knowing when to make purchases is an essential factor when it comes to your sales and operations plan. Knowing what you need at any given time is a must. It will assist you in creating a supply chain that is capable of meeting your needs at all times. In addition to your list of primary suppliers, it's a good idea to have a second line of suppliers that are available to you if your first line supply cannot meet your needs or has suffered an emergency that prevents them from filling your regular order.

Always Have a Back-Up Plan

You should always have a back plan. Much like your secondary list of suppliers, having a back-up plan in place will ensure that you are always able to keep up with the demands placed on your business. If demand increases, you may need to bring in another shift. This means you will need to increase both your inventory as well as your human resources. Hiring extra workers is easily accomplished through a temp service, but you need to be able to cover the financial cost of the workforce and the additional inventory. This is where having an up-to-date sales and operations plan is important.

Tying It All Together

An effective sales and operations plan goes hand in hand with proper supply chain management. It is also the foundation you must rely on if you plan to build a successful business. Focusing on your company's sales and operations will help you understand what steps you need to take to maintain a progressive workflow. If you understand your past trends, you will be able to come up with a solution to any type of disruption you may experience. Utilizing the steps within your back-up plan will ensure that your company continues to move forward at all times.

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Ankur Shah is the founder of the Value Investing India Report, a leading independent, value oriented journal of the Indian financial markets. Ankur has more than eight years of equity research experience covering emerging markets, with a focus on India and South East Asia. He has worked as both a buy-side investment analyst for a global long/short equity hedge fund and a sell-side analyst for an emerging markets investment bank. Ankur is a graduate of Harvard Business School. You can learn more about his latest views on global markets at the Value Investing India Report. -- He can be emailed at AnkurShah47@gmail.com
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