- 27 May 2004 15:11
Intentia's New Sales Budgeting Tool Reduces Budget Time Planning by 50%
Australia/New Zealand – 27 May 2004. Intentia, the collaborative enterprise software company, has developed a ‘closed loop’ sales budgeting tool that is fully integrated into Movex Demand Planner. The new tool is a key component of ‘closed loop’ collaborative budgeting for the entire supply chain, and Intentia believes it will reduce budgeting time by a minimum of 50 percent compared to conventional processes.
Intentia also believes the new integrated sales budgeting tool is unique. It has been developed because Intentia saw a business requirement for a more collaborative and inclusive, multi-dimensional approach to budgeting that tightly links together the sales budget, production and logistic resources with the financial goals.
“Many companies would like to use ‘closed loop’ budgeting because it’s more accurate,” said Peter Cornelius, product director at Intentia Research and Development. “It enables companies to run and evaluate different scenarios and options for the whole supply chain, and create a better managed and more accurate budgeting process. But in the absence of integrated systems ‘closed loop’ is a difficult process to run.” Cornelius said that currently the budgeting process for most companies is too linear. “The sales budget process, in particular, is awkward and cumbersome. It involves the extensive circulation of spreadsheets for completion which then have to be consolidated.
“But using the new tool, sales budgets are entered directly into the system, with the added benefit that user defined column values can be set in the budget model to define areas such as margins and key performance indicators (KPIs) that relate to the budget. And, like a spreadsheet, each column replicates its relationship with other defined columns.”
Cornelius explained that the Movex collaborative enterprise system acts as the transactional engine in ‘closed loop’ budgeting. He said information is taken from Movex into Movex Demand Planner (DMP) to create the sales budget. This information is then taken into Movex Supply Chain Planner (SCP) to simulate planning options and identify constraints on purchasing, production and distribution.
The sales budget and constraints are then used to arrive at a consensus sales budget which is used in Movex to calculate the costs drivers and feed Movex Professional Planner for the profit and loss analysis. However, if the simulated model doesn’t meet required profit levels and return on capital employed, the whole process can quickly be re-run using different parameters and cost drivers
“By using the sales budgeting tool the whole process becomes faster, more flexible and more user friendly. With ‘closed loop’ companies can break out of the ‘silo’ approach to budgeting, be more collaborative and see the business in a different light. The agreed budget is more accurate and has a corresponding positive impact on the bottom line,” concluded Cornelius, citing the example of Intentia customer Jotul.
Gunnar Christian Hjortaas is chief financial officer of Jotul, a Norwegian company that manufactures wood-burning stoves and gas fires for the home. Its main direct markets include the Nordic countries, the USA, France and the UK; sales to central and eastern Europe, Spain and the Benelux companies go mainly through distributors.
Hjortaas is a strong advocate of ‘closed loop’ budgeting which, he said, has become a major factor in the company’s success. “We introduced ‘closed loop’ budgeting in 2002 and it enables us to more accurately allocate costs against 2000 article numbers,” he explained. “This has resulted in more accurate pricing and the ability to focus our limited manufacturing resources on higher margin products.” More…
He added: “With ‘closed loop’ our budgets are more transparent and complete because we are able to integrate all aspects of the budgeting process. This enables us to run different scenarios until we arrive at an optimum budget that balances demand and supply chain capacity with the need to achieve the desired margins.”