No matter how much time and thought is spent in drafting the strategy and planning forecast it is inevitable that the reality will deviate from what is expected as a result of the volatile internal and external factors that exist at the time. Therefore it is critical to continually review actual performance, analyse the trends and take appropriate action to minimise the risks. Where adjustments are not able to be made to remedy a situation the lessons learnt must be taken on board and banked to be avoided in future trading seasons.
The path to follow in the process of comparing the actual performance in relation to the plan can be outlined as follows
The start point of analysing and comparing the actual performance to the intended plan at a point in time, is to firstly to compare actual sales to date at total departmental level and drill down to product level and based on the result, review the planned sales for the balance of the season.
The potential new sales forecast is then compared to the actual commitment of product in the form of stock on hand at stores, product in transit and that at the supplier as well as the orders in the pipeline to determine the resultant shortage or surplus of stock.
In the scenarios below the assumption is that the department consists of a product which is over performing, another that is under performing and one that is selling to expectation.
The procedure which needs to be followed can be broken down into three distinct activities.
- The recording of the total plan for the season in terms of sales and the planned breaking stocks at the end of the season as well as the current week’s performance which has just been completed.
- Based on the comparison of the actual sales to date in relation to that which was budgeted for may require a review of the balance of sales to be achieved and thereby create a revised forecast for the total season. The change in the sales forecast may also then require an adaptation of the planned breaking stocks to reflect the reality of the sales plan.
- Once the realistic revised sales performance has been established, the result then needs to be compared to the total stock commitment and assessed whether there is sufficient stock in the pipeline to achieve the revised targets. If this is not the case, a plan has to be devised in order to determine what action is required to achieve this or conversely there may be a consequent surplus of stock which will have to be reduced.