Oracle Corp. had its slowest growth over a quarter in more than six years. Its cloud revenue typically grows at a rate of 52 percent (over the last eight quarters), but in the first fiscal semester of 2018, it only grew 32 percent. A 32 percent clip over three months is tremendous growth for a large firm like Oracle, but it is low compared to its tech industry competition. Oracle’s rivals followed more in line with their eight-month trend in the last quarter. Oracle’s databased is mature, and investors are looking for Oracle to venture into new endeavors like cloud-based products. Oracle is late to the game in this segment of the market, whereas, Amazon has held most market share. Amazon has created many new “cloud-based products”, including the Echo and Fire TV.
While reading this article, I asked myself a few questions. How do firms forecast sales while they don’t know what its competitors are creating? How do firms plan for a dip in sales? How can the company adjust to unexpected changes in demand?
These questions can be answered by the topics we covered in class pertaining to sales and operations planning. APICS defines sales and operations planning as the “process to develop operational plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of supply chain.” The purpose of sales and operations management is to optimize trade-offs, maximize profits, and, ultimately, satisfy the customer. To achieve these goals, a firm must gather data, forecast demand, supply planning, have a pre-SOP meeting, and, to culminate, have an executive SOP meeting.
Oracle forecasted its demand for “cloud-based products” to grow along its eight-month trend, instead it only grew just over half of the average they predicted. This was caused by Oracle being a late-adaptor to the cloud-based sector of the tech industry. To overcome or combat a big loss over a quarter, month, or year, a firm can think ahead and take measures before it suffers a sales hit. A firm can forecast demand and plan capacity to create detailed plans and schedules to fight a sales loss. Detailed planning happens daily, the planners hold the accountability, and aggregation level by AKU, line, and parts.
The first step in achieving solid sales and operations management is gathering data. While gathering the data, it’s vital that the data is precise. If not the demand forecast and planned inventory will be inaccurate. This can cause a company, like Oracle, to over produce. Over production leads to inefficient usage of time and less profit. A great dip in quarterly demand (20% for Oracle) for a big company, can lead to millions of dollars in profit losses. Oracle over produced its cloud based goods, and in a tech industry that is ever-changing, that over production may lead to products sitting on the shelf forever. A strong grasp on sales and operations planning will maximize profits and satisfy the customer’s needs without having to increase production or expand a firm.