Step 2 Lay Out Pro Forma Functional Activity Specifications

With the financial statement, one forecasts the operational performance needed to meet financial goals. A proforma income statement is similar to a historical income statement. However, it projects the future rather than reports on past performance. This requires defining the supply chain activities needed to support the product. The range of assumptions is broad and will vary depending on the product. Examples are production, distribution, sales force, and revenues. If the product requires a new supply chain, this tool will set financial constraints for its design. Capital costs should be translated into operating costs using the tools described in Section 27.3.2. 

If a company specializes in either functional or innovative products and has its supply chains designed accordingly, this is a good time to 

Some examples illustrate the assumptions needed for the specifications. In the assumptions regarding sales, this can include assumed prices, salesperson productivity, size of orders, and necessary inventory. Manufacturing assumptions include capacity, cost of material, and worker salaries. Distribution includes mark-ups and costs of getting the product to customers. In the case where important suppliers provide components or supply logistics services, they should participate in the process of establishing specihcations. 

Because the plarmer must docmnent performance in the supply chain, discovery-driven planning is valuable for guiding supply chain planning. It is also an excellent time to quantify the irmovative or functional supply chain design. The specifications will be different for the two types. Functional products will show narrower margins so the supply chain design will emphasize 

If a company specializes in either functional or innovative products and has its supply chains designed accordingly, this is a good time to decide whether it s wise to invest in a completely different type of chain. Alternatives would be dropping the product altogether or licensing the technology to a company with a supply chain that matches the requirements of the product and market. 

---