Annual planning cycle
What Is The Annual Planning Cycle?
An operational plan made every year is strictly dependent on the planning cycle of the corresponding year. It facilitates the entire planning and manufacturing of b2b supply chains by encompassing financial budgets and prediction of possible uncertainties in a given period.
In other words, an annual planning cycle is a process repeated every year that considers budgets, forecasting risks and opportunities in the future, and forming strategies and operational plans. The business flourishes with efficient management and better coordination between departments and employees.
What Are The Steps In The Annual Planning Cycle?
Different b2b supply chains and manufacturing organizations follow specific steps in the annual planning cycle. Widely, these five steps make up this cycle.
- Strategy Alignment- In an article in Harvard Business Review in 2016 raised two questions. How well can a business strategy support the realization of the company’s purpose? How well can the organization support the achievement of its business strategy? Strategy alignment is a system that ensures that a b2b or any organization’s structure, utilization of its resources, and work culture support its strategy. Wider work environment, awareness, technological upgrade helps in this. It helps in the efficient utilization of resources. It is beneficial in large businesses spread over vast geographical firms or regions having complementary goals.
- Operational Forecasting- Manufacturing, new product generation, and logistics, come under operational processes. Purchase managers and procurement professionals are in charge of the same. However, organizations implement forecasting methods such as time series analysis, projection, and causal models to predict business outcomes. The resultant estimates from these forecasts help managers to develop and implement production strategies accordingly. Operations managers contribute to the entire process to deliver the final product to the end-user. These forecasts enable budget formulation, sales, and demand planning.
- Financial Forecasting- Financial forecasting involves collecting requisite data, processing, estimating, and predicting the possible future performance of a business. This estimate is crucial in getting a fair understanding of how the business might look financially in the near future. Like all forecasting, historical performance data enables visibility into the future. These help predict future trends so that the business can prepare accordingly.
- Capital Facilities Planning- Capital planning proposes specific work or projects and estimated costs for the future. It allows businesses to better understand the future of their assets and plan in accordance. Effective capital planning has numerous merits. It facilitates the organization’s strategic objectives and priorities, long term goals, ensures understanding and coordination among key decision-makers, and provides a viable platform for communicating the same to shareholders about the financial needs and priorities of the business.
- Facilities Planning- Facilities planning is the formulation of a long-term and progressive strategy for managing a single facility or an organization’s complete space area that supports its operation for present and future scenarios.
- Annual Operating Plan- The last stage of this cycle is developing an annual operating plan, which is a document that defines the financial, physical, and human resources required to achieve the short-term goals of the business. In other words, it is a roadmap for operations within an organization for a given time, usually a year.
Moreover, it is often thought that the alignment of business strategy and HR strategy impacts performance. Coalignment of business strategy, business structure, IT strategy, and IT structure contributes to performance. Alignment also generates a positive work climate, staff engagement, a solid commitment to core values, and fewer in-fighting.