Background
Manufacturing firms require detailed budgeting and forecasting capabilities to properly align corporate strategy with Annual Budgeting and Supply Chain Management. While many organizations can and do plan at high levels within their product hierarchy, manufacturing firms often require planning at the material level to provide the accuracy in materials forecasting that returns value from the planning process. Market sensitivity, product replacement, and reallocation of material sales are commonplace and any budgeting or forecasting tool must provide planners with the agility to adjust. Oftentimes, material sales will differ greatly by customer, and various levels of the product hierarchy may not be applicable at all.

Client’s Business Problem
The client’s Director of Finance was faced with the complicated, labor-intensive task of creating a 15 month Annual Operating Plan to return detailed Gross Margin by material, by customer. The current process of constructing the Annual Operating Plan manually in Excel became a tedious endeavor requiring months of data aggregation and allowing little time for analysis or planning. Additionally, data entry errors, version control, and accountability of the forecasts provided by the sales staff proved to be problematic.

Facing resource limitations and limited product knowledge, the client required an enterprise planning platform that created an Annual Operating Plan at the material level without burdening their limited group of contributors with data entry. They also sought to restructure the workflow management of their organization and provide the Director of Finance and the Chief Executive Officer with the bottom up contributions and top down visibility corporations desire. Moreover, despite having over 60 customers and 1,600 material level products, the limited resources available dictated that any application would need to aggregate data quickly. Essentially, the process would require an application that allowed material level detail, but did not burden the user with excessive data entry or review. The customer also desired a solution that would allow subsequent phases of the project to address a rolling forecast and utilize Cognos Business Intelligence products.

Improved Business Results With a CenterStone solution
CenterStone engaged the client with a 12 week phase one implementation. Following the proven CenterStone methodology, the consultant led the finance/sales project team in a requirements gathering phase to reengineer the organizational budgeting process and workflow management. The new process would be intuitive to the end users, who had little, if any, finance experience, while allowing them the capacity to change product quantity and price at the material level, but only at their discretion. In order to achieve this, the consultant designed the application to interface with the client’s ERP system, SAP, and provide all users with suggested historical allocations for all material quantities. The users could then concentrate on forecasting market share at higher levels of the product hierarchy, then adjust material quantities and price at their diplomacy in the latter stages of the process. This design allowed users to accept historically driven allocations as an alternative to physically forecasting every material number, satisfying a key initiative of the project which was aggregation speed of the process. The application was also designed to provide contributors and reviewers only the materials relevant to their customer for review. This greatly reduced the amount of data for user review, giving each tab the “clean” look that augments the submission process. By using advanced modeling techniques, application performance was not compromised by the large amount of detail.

Business Benefits
The client has reported significant improvement in budgeting accountability and, by extension, accuracy and reliability of data. Due to the increased speed of aggregation of the Annual Operating Plan, the Finance Director now has several additional weeks to spend analyzing and adjusting key drivers. Additionally, the ability to produce a plan with recent, relevant data has allowed the client to run their business in a proactive state rather than the reactive state in which they were previously relegated. The Supply Chain Manager has also reported drastic benefits by using the material quantity forecasts submitted to enhance material procurement and inventory management activities.

• The involvement of CenterStone enabled the customer to implement a best practice budgeting tool on time and within budget, exceeding the expectations of the project and providing residual benefits to the business that were not anticipated.

• While the Annual Operating Plan consolidation was previously a four month process, the production application created by CenterStone delivers the process in only two weeks, leaving over three additional months to analyze and plan.

• CenterStone’s expertise in workflow management and financial business processes helped guide the client to utilize the Cognos Enterprise Planning project to completely reengineer their workflow management and budgeting processes.

• The knowledge transfer initiatives prioritized by CenterStone has enabled the client to administer and maintain the application with minimal remote support.

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