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.
