The Right Processes Will Make or Break Demand Planning

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MakeOrBreakManaging an effective demand planning process is challenging even in a small company and can be the primary source of problems or solutions to many enterprise planning challenges.  Demand planning people are rarely heroes and often villains — becoming the source of everyone’s anger and criticism.  Even so, they are still the go-to people when answers are needed.  In many ways this simply proves that demand planning is one of the key upstream processes in running an efficient intelligent enterprise.

There are several facets to a structured demand planning process that need special attention

  • Baseline forecasting – With the right data and the right tools, the baseline forecast is the basis by which the initial demand forecast is built.  As discussed in my earlier blogs, this is usually only accomplished with a statistical forecasting engine capable of a more sophisticated forecast than the classic use of spreadsheets.  The baseline forecast is first carefully evaluated and adjusted by the demand forecast owner before allowing it to be reviewed by other stakeholders and information consumers.
  • Managing the structured process – The primary process owner or quarterback must establish schedules/deadlines, drive the process each month and be an important contributor in targeting and goal setting.  Without the process owner continuously driving the process, it will slowly (or sometimes quickly) die a painful death.  Obviously, without full support from the management teams of each process contributor, the process will also fail.
  • Collaboration – This is where the baseline forecast gets a multi-dimensional adjustment in a very structured way by carefully choosing the right set of stakeholders to contribute in the process.  The usual suspects are sales management, sales territory managers, demand planners and sometimes product marketing people.  For this highly structured process to work, it must also have the right tools to support the collaboration effort in order to get only the required inputs at the required time in the forecasting cycle.  While freeform inputs might provide insight, they tend to disrupt the structure and the process automation.
  • Choosing the right level of process structure – Balancing the planning requirements against the collaborator’s own business processes can be very difficult and a source of many project failures (e.g. $ vs. units, cases vs. weight, customers vs. SKUs).  For the structured process to run smoothly, it does have to be designed to gather the level of detail needed to create the final plan but also respect the contributor’s own time and knowledge constraints.  Pushing this past the normal operational limits and placing abnormal demands on the collaborators will result in process failure or at best an inaccurate forecast.
  • Measurement and accountability – Continuous improvement must always be the goal; and to accomplish the desired improvement, the right tools employed in the right process will deliver outstanding results.  Using a tool or system of record to continuously measure forecast accuracy at various levels and at various planning horizons will provide the feedback to make the necessary changes to support the continuous improvement goals.
  • Establishing a Win-Win environment – The process team leader’s role is not only to manage the process but to establish a win-win environment for all the stake holders.  The process will not succeed unless there is a driving reason from all parties to continue.  A demand planning process designed and managed carefully will provide the primary elements of success for all the stake holders – improved product availability resulting in higher sales and lower inventory levels resulting in lower costs.

In future blogs we will look at the relationship between demand planning and inventory levels and the leverage points.

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This post was written by John Hughes