Picture a mid-size textile company. The sales team says they will move five hundred rolls of fabric next month. The warehouse manager looks at last year’s numbers and orders three hundred. By the end of the month, some customers cannot get what they ordered, and other products sit on the shelf collecting dust. This is not a rare story in Turkish small and medium-sized businesses. It happens every month, and the root cause is simple: the sales forecast and the operations plan are not talking to each other.
SCM, or supply chain management, is the practice of coordinating the flow of materials and information from raw inputs all the way to the customer. One of its most important pieces is demand planning. Demand planning means answering the question ‘how much will we sell?’ and then using that answer to drive purchasing, production, and warehousing decisions. The trouble is that sales answers this question on their own, and operations answers it on their own. The two answers rarely meet.
Why does this happen? The sales team talks to customers every day and has a real feel for the market. But that knowledge rarely gets written down in a structured way. The operations team works from inventory cards and past order records. Information passes between them in brief hallway conversations or at weekly meetings that cover too many topics at once. Their computer systems, if they have any, run separately. In some businesses, sales tracking is still done on paper. The result is predictable: either the warehouse buys too much and ties up cash, or it buys too little and cannot fill customer orders on time.
The most practical fix is a regular monthly planning meeting. Sales, purchasing, and production planning all sit at the same table. The agenda has one question: how much will we sell next month, and what do we need to have on hand to deliver it? Sales brings what they know about customers and market conditions. Operations brings current stock levels and supplier lead times. Together they agree on a number. That number feeds directly into the purchasing plan and the budget.
This is where software earns its place. If the business runs an ERP (enterprise resource planning) program, the agreed sales forecast can be entered into the system and the stock and purchasing modules will calculate what needs to be ordered. The program works out how much stock is on hand, how much is needed, and how much to buy. Instead of doing this by hand, the program handles it automatically. Errors go down and planning time shrinks. But the program can only work with what it is given. If the forecast entered into the system is wrong, every calculation that follows is also wrong. A computer program is not magic; it gives back exactly what you put in.
The monthly meeting also keeps the budget honest. If the sales forecast starts drifting away from the budgeted number, the team catches it early. The sales manager can say ‘we budgeted a hundred units but the market has slowed, eighty is more realistic.’ When that information reaches purchasing and production in time, unnecessary stock purchases are avoided. After the 2001 economic crisis, cash management became more critical than ever for Turkish businesses. Carrying excess inventory is just as expensive as taking out a bank loan, and it drains working capital just as fast.
For this system to work, three things have to be in place. First, the meeting has to happen every month without fail. Skip one month and information gaps start to build up. By the next meeting, nobody is sure which numbers are current. Second, the sales team has to give honest forecasts. Writing down inflated targets to motivate the team misleads the operations side and leads to over-purchasing. Third, stock and order data have to be entered into the program regularly and accurately. If the database is not up to date, the numbers on screen during the meeting are worthless. None of these three requirements are technology problems. They are habits and discipline problems.
For a small business owner or manager thinking about bringing demand planning and sales forecasting together, the first step is not buying new software. Start with the monthly meeting and make it a fixed routine. Even a shared spreadsheet and a consistent meeting discipline can close most of the gap. The software can come later. Building the meeting habit takes longer and matters more, because no program, however well designed, will work without the human discipline behind it.
This article was originally written in Turkish by Gökhan MERCANOĞLU on March 10, 2003 and has been automatically translated into English and other languages using machine translation.