How do you evaluate a sudden demand spike communicated by your Sales person within lead time? This was an unforecasted surge in demand.
Most companies freeze the next month or next three months from Sales Forecasting input. Sales Managers are allowed to change forecasts only outside the three month demand horizon. I am not sure if this is a good practice but this is the reality in a number of cases.
– In this case, the demand communicated is first posted as needing approval from supply planning
– Supply evaluates this and either agrees and approves the surge or disagrees which means Sales Manager has to work with the customer to move the order out or find an alternative solution
Typically, Supply planners work this through the concurrent planning platform to evaluate the supply risk – understand what could be the potential out of stock or if some supply resources need to be expedited. If they are able to meet the additional demand by re-adjusting product mix or expediting the supply chain, this could result in a margin squeeze.
– Less profitable product mix
– Overtime
You should be able to evaluate and say “Yes” or “No” and if “yes” what is the cost or loss in margin?
If this is an AOP scenario and you are evaluating a potential Layer, you need to be able to demonstrate the effect on your projected P&L.
We will discuss these potential scenarios in our upcoming webinar.
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