Owners of manufacturing businesses constantly face challenges when planning for the year ahead. These challenges are magnified by rapid shifts in economic conditions, supply chains, labor markets and customer demand.
Indeed, volatile interest rates, fluctuating material costs and global disruptions can quickly derail even your best projections. As a result, you may be rethinking how to model your forecasts. One option to consider is moving away from traditional static forecasts toward more flexible rolling forecasts.
Differences between static and rolling forecasts
Manufacturers typically prepare a static forecast annually, and it remains fixed for the entire fiscal year. It’s based on assumptions about sales volumes, costs and market conditions at a single point in time. While this approach can be useful for setting an initial budget, it doesn’t adapt as circumstances change.
A rolling forecast, by contrast, is updated regularly — often monthly or quarterly. Instead of locking management into assumptions made long ago, rolling forecasts incorporate the latest actual results and expectations.
Advantages of using rolling forecasts
Rolling forecasts can provide earlier visibility into potential cash flow constraints, allowing owners to address financing needs before they become urgent. They also support better capacity and inventory planning by aligning projections with current demand trends rather than outdated assumptions.
Perhaps most important, rolling forecasts encourage ongoing strategic conversations. Instead of treating forecasting as a once-a-year exercise, manufacturers can regularly reassess pricing, staffing, capital expenditures and growth initiatives as conditions evolve.
In addition, these strategic conversations can include contingency planning. Some manufacturing processes rely heavily on a specific raw material or component. Creating “what if” scenarios allows management to see how a sudden price increase or shortage would affect performance and put contingency plans in place to mitigate the impact.
Expanding your forecasting options
In an industry where costs, demand and economic conditions can shift quickly, relying only on a static, annual forecast can lead to manufacturers reacting instead of planning. Rolling forecasts offer a more adaptive approach by continuously incorporating new information and extending the planning horizon, helping you anticipate challenges and adjust strategies sooner. Before making a final decision on rolling forecasts, contact us. We can help you determine the best options for your manufacturing company.
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