Pillars of Planning: Plan to the right frequency
Now that we’ve looked at what level to plan and at what horizon, we can take a look at the third ‘Pillar of Planning’ – planning frequency, which depends on the context you’re looking at. However, a general rule of thumb is: the more volatility, the more planning. The goal is to keep your plans in tune with what’s happening in the market so you can react to threats and take advantage of opportunities effectively.
Let’s look at a fashion house like the highly profitable global fashion brand Zara, which produces new collections every couple of weeks and over 450 million items of clothing annually. It’s small-batch deliveries arrive at stores around the world twice a week, like clockwork. Controlling its design and manufacturing supply chain is essential. Knowing what stores are moving items so they can replenish stock as much as possible without overstocking items before the next collection arrives is a non-negotiable.
Would a quarterly planning horizon work for Zara? Certainly not. What about a weekly? It would do better at forecasting sales and inventory needs, and many retailers would be perfectly fine to have a weekly planning horizon. But not Zara. They work on a 24 hour planning horizon with their network of stores receiving new stock daily. The result is their rockstar supply chain and happy fashion-savvy customers, enabling mass production, incredibly well-managed inventories, high profitability, and value creation for its shareholders both short and long term.
Plan to a frequency that matters. This could be annually, monthly, or weekly (or even daily!). And do it in an environment that is easy to maintain for everyone using it so that they can react well to the uncertainties of your market. The right frequency makes all the difference in reacting well to threats and taking advantage of opportunities in the market.
Want to know more about planning frequency or discuss integrating the Pillars of Planning into your corporate planning processes? Get in touch!
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