Here are some discoveries and outlines:
- Top Down consists of CEO laying down desired market share and EBITDA.
- CFO and Planning Dept percolate the expectations and broad guideline for Bottom Up numbers.
- Planning Dept constantly researches demographic data to determine market size by town, region etc. Desired market share is indicated against this data.
- Marketing Dept rolls up sales number by town, region, zone for every product and category
- Engineering project current product cost and expected saving to arrive at marginal cost
- Operations work on manufacturing cost, CAPEX, planned production at various plants etc
- Fixed cost is determined and suitable apportionment formula is arrived at
Over few handshakes, top down and bottom up numbers are leveled and agreed upon.
As part of discovery, we looked at business drivers all around. For example, on the revenue side, we discovered;
- This company shares sales data every month with their competitors and receive similar information from them.
- Information is available on planned new product release by the company and by competitor
- Data on sales influencers like festive period, incentives available
- Data on dealer spread and dealer productivity available
We drew an architecture to include all the external data into the planning process as business drivers i.e., demographic data, competitors sales information, dealer productivity and other sales influencers. Why?
Demographic data,as the base, derives potential consumer size and segmentation in a given market. Segmentation information drives product mix, product price, incentives and positioning. Market size determines dealer spread, market coverage, productivity and additional investment, if any. Competitors sales data (while price information is freely available in public domain) vis-a-vis actual sales, will validate size, segmentation, relative market share on a continuing basis.
By including all these into the planning process,
1. Top Down and Bottom Up approach became 360 degrees by looking internally and externally
2. As all these data reflect market dynamics, monthly update provided better analysis of Plan Vs Actual
3. Drilling down on Variances became more rounded, providing information for actionable items
If we had not considered these, a typical implementation, bereft of business drivers, would have only resulted in superior automation of the existing process and nothing more.
'Subbu' Balakrishnan | EPM and BI CoE
'Subbu' is a qualified Cost & Works Accountant, Company Secretary and Law Graduate, with more than 20 years experience in operations and IT.