“If you fail to plan, you are planning to fail”
This statement is certainly just as relevant today as it was over 200 years ago. In fact, one may argue that given the current VUCA (Volatile, Uncertain, Complex and Ambiguous) fast changing world, this statement becomes even more relevant. Planning is not only reserved for business endeavours – planning impacts all of our choices including our personal and career choices. I will use examples in this article to show a few scenarios to illustrate the cost of not planning. This list is not exhaustive, however it will be sufficient to show why planning is so crucial.
Examples of how poor planning costs businesses
Let us begin with an obvious example: you are in the construction industry and do property development (i.e. you build). You are building a residential home for your client and now you need to pour concrete in the foundation. You decide to purchase readymix concrete. Let us assume that you skip planning and end up in the situation where the readymix vehicle is at your gate but the steelwork has not been completed and inspected. The cost of poor planning will result in the following potential costs to you:
- You get charged standing time for the readymix vehicle to wait for you to offload, assuming you will be ready on the same day.
- You cannot use the readymix concrete on that day and hence have to send the vehicle away. You are now liable for the product.
- Let us also assume that you brought in more labour to level out the concrete. You incur the cost of the labour but do not get the output (they are underutilised).
Applying proper project management planning and thinking would have helped you avoid this type of mistake.
You install fibre (internet connection) for residential property owners. To be profitable, you want to ensure that you complete two installations per day. Here are two potential planning errors:
- You do not schedule clients who are in close proximity to each other. This increases the transit time between the clients resulting in the cost of fuel and additional driving.
- You do not plan the estimated times at which you will be at the client’s premises and do not communicate with this with the client. When you arrive at the client’s home, they are not available and you either have to wait or come back. You end up doing only one installation on that day.
It is obvious that the above scenarios will result in you incurring additional costs and a potential loss of revenue – all of which can either be avoided or drastically reduced if the proper thought and planning is done.
You are in the FMCG (Fast-Moving Consumer Goods) sector and manufacture dishwashing liquid. Your team skips proper demand and supply planning. Without having an idea of what volumes your customers will purchase in the upcoming months, your production planner blindly decides on what quantity to produce. Here are the potential costs for this type of poor planning:
- If you produce excessive amounts versus what your customers actually buy:
- You may need bigger storage space
- Your holding costs increase (insurance, etc)
- You could experience pilferage (stealing stock)
- There may be damage to stock
- You have a cluttered warehouse and hence cannot find anything
- Poor stock management resulting in stock expiring
- If you produced less stock, you short supply your customers which will result in a loss of revenue and your customers may go elsewhere.
The application of a robust S&OP (Sales and Operations Planning) process together with proper planning principles and tools goes a long way towards reducing the above inefficiencies and costs to the business.
I hope that this short article has highlighted the importance of planning and the accuracy of Franklin’s quote. Poor planning and lack of planning will always cost businesses in the short, medium and long term. The cost to your business may not always be visible but it will definitely be felt. The following quote by W. E. Henley is very apt: you are in charge of your own planning. If you plan, you are in control. If you do not plan, you are at the mercy of fate and we know that sustainable and profitable businesses are not built on luck.
The last thought I would like to leave you with is:
Do you and your team possess the necessary skills and capability to plan properly? Nikshen Consulting is here to help, if you see this gap.
“Weak leaders hesitate to ask for help, fearing others will see them as incapable. Strong leaders, on the other hand, focus on more strategic issues of accomplishing the mission, developing team capabilities and confidence for overall success.” – Forbes
Dr Kenneth Moodley is an experienced supply chain and business professional with over 25 years’ experience. As someone who has applied systems dynamics and systems thinking he is well placed to support organisations on their journey. He has a demonstrated history of working with both big corporates (example: Unilever & The South African Breweries) and SMME’s (Productivity SA) in various industry sectors as a senior Supply Chain Specialist, Leader and Business Coach. In addition to his supply chain experience, he is a skilled business turnaround strategist and is a registered senior business rescue practitioner.