Skip Navigation LinksHome : White Papers : Planning

Resource Planning/Budgeting

Planning one week at a time is not really planning at all. 

Consider a sales forecast of $400,000 for a location for a month, and a management objective for selling cost percent of 6%.  The budget for the month is quite simple to calculate.  6% of $400,000 is $24,000 – easy enough.

If it is a four week month then the budget for each week should be $6,000 - well, not really.

If the sales by week are as shown in the table below, then operating with a budget of $6,000 for each week will yield a selling cost by week as shown in the CF% column and a productivity (assuming a $10 hourly pay rate) as shown in the SPH column.

Week

Sales ($)

Budget ($)

CF%

Budget (Hrs)

SPH

1

50,000

6,000

12.00%

600

83

2

150,000

6,000

4.00%

600

250

3

100,000

6,000

6.00%

600

167

4

100,000

6,000

6.00%

600

167

Total

400,000

24,000

6.00%

2,400

167

Table 1

This plan achieves the objective for the month, but there is a problem with this plan.  The problem is that the productivity in Week 2 is three times the productivity in Week 1.  While higher productivity is desirable from a short term profitability view, it also implies a lower level of customer service.  We would like to achieve a more consistent level of customer service.

A better plan might be to set the CF% for each week to 6% as shown below.

Week

Sales ($)

Budget ($)

CF%

Budget (Hrs)

SPH

1

50,000

3,000

6.00%

300

167

2

150,000

9,000

6.00%

900

167

3

100,000

6,000

6.00%

600

167

4

100,000

6,000

6.00%

600

167

Total

400,000

24,000

6.00%

2,400

167

Table 2

This plan provides a constant level of productivity each week and as a result it implies a more consistent level of customer service.  However, this plan doesn’t really work for the following reasons. 

First, for security and loss prevention reasons the minimum staffing level for the location is six associates.  Since the location is open for 72 hours during a normal week the minimum plan for each week should not be less than 432 hours.

Second, few retailers can change capacity so dramatically.  Scheduling 300 hours in Week 1 followed by 900 hours in Week 2 requires a mix of associates that is heavily weighted toward part time and contingent staff.  In some environments part time and contingent associates just don’t provide the skills needed for the selling floor.

Finally, to retain full time and part time associates the organization has committed to schedule a minimum of 400 hours per week for current associates at this location.  We refer to this commitment as the weekly base hour requirement.

If we factor in the minimum staffing and base hour requirements then the resulting plan is shown below.

Week

Sales ($)

Budget ($)

CF%

Budget (Hrs)

SPH

1

50,000

4,320

8.64%

432

116

2

150,000

8,232

5.49%

823

182

3

100,000

5,724

5.72%

572

175

4

100,000

5,724

5.72%

572

175

Total

400,000

24,000

6.00%

2,400

167

Table 3

With this plan minimum staffing requirements determine the plan hours for Week 1, while plan hours for the remaining weeks are driven by sales and productivity, and constrained by the overall selling cost objective of 6% for the month.

However, if we look more closely a question emerges for Weeks 3 and 4.  The table below presents the daily sales for Weeks 3 and 4.

Day

Week 3

Week 4

Sales

% of Week

Sales

% of Week

Sunday

12,000

12%

16,000

16%

Monday

8,000

8%

12,000

12%

Tuesday

6,000

6%

8,000

8%

Wednesday

6,000

6%

8,000

8%

Thursday

8,000

8%

12,000

12%

Friday

10,000

10%

16,000

16%

Saturday

50,000

50%

28,000

28%

Total

100,000

100%

100,000

100%

Table 4

Note that, although total sales for the weeks are the same, there is a dramatic difference in the distribution of sales by day.  A major promotional event on Saturday of Week 3 means that 50% of the week total occurs on Saturday.

Click on the “View PDF Button” to see the rest of the story. You will need to Sign-In if you haven’t already done so.

If you haven’t registered yet please go to the registration page.

Constant weekly hours produce fluctuating productivity and inconsistent customer service when weekly sales change.

However, adjusting hours to provide constant productivity fails to satisfy base hour requirements and staffing minimums and requires capacity changes that are difficult to achieve.

A balanced plan satisfies minimum staffing and base hour requirements and allocates the remaining hours to periods with higher forecast sales.

Copyright © 2001–2021 Focus Systems Corporation (Unknown 0.0)