By Patrick Bower and Buks Van Zyl
Driven by an unprecedented spike in marketplace activity — new product introductions, promotions, the explosion of stock-keeping unit (SKU) counts, price-related "gaming," savvier consumers, and the now-global crush of competitive pressure — a sharper view of future demand is a must-have weapon in the quest for nimble supply chains that can rapidly respond to fluctuations in demand patterns.
Across all industries, organizations are struggling to meet the market-driven surge in customer service requirements while simultaneously striving to make the most of working capital. Hypercompetition is driving down prices, leading many to choose offshoring as a way to reduce costs and manage pricing. Yet solutions like offshoring have their own risks, as revealed in cautionary tales about wrong inventories being shipped overseas or costly air freight shipments from distant supply lines to meet urgent customer needs.
The heightened urgency to improve demand planning is also being driven by development of other internal processes like Lean, sales and operations planning (S&OP), and Sarbanes-Oxley compliance. S&OP emphasizes the importance of a one-number plan. Lean, and similar best-practice supply-centered processes, address the importance of a quality, single-number demand signal to propagate though the supply chain. And Sarbanes-Oxley's requires a reality-based portrayal of future business opportunities, which is another reason to improve demand planning process output.
With ever more complex demand planning puzzles to solve and with greater urgency to develop demand planning expertise — within and throughout their own organizations — business leaders are focusing on comprehensive approaches to enable high-performance demand planning. In fact, many view optimized demand planning as the only realistic lever to help manage supply chains in today's ruthless markets.
Gone are the days of narrowly focused "silo" strategies, based on a tool, a process or a training plan. Today's best-practice approach is much more comprehensive, based on a holistic model that incorporates people, process and technology improvements to enable optimal demand planning.
Breaking Down Demand Planning
With decades of hands-on experience and insight into real-world challenges facing global supply-centric organizations, our company's industry-veteran supply chain specialists developed a Demand Excellence process approach based on this all-encompassing model for a number of reasons.
First, we witnessed firsthand the need to define a demand planning standard that breaks down the silo approach and collectively examines the processes and sub-processes that support and enable the tools, the consensus process and the overall business needs of an organization to develop a quality demand plan.
Second, merely acknowledging and articulating the existence of a demand excellence process exposes the numerous disciplines and expertise that demand planners must master to create quality demand plans. While this "exposure" often reveals gaps and deficiencies, candidly acknowledging what you "don't know" is key to developing skills and competencies. And since the demand planning role has evolved over the years, from a chiefly clerical position to a pivotal business planning role, our Demand Excellence model acknowledges and addresses the importance of that shift.
By definition, Demand Excellence has three distinct major processes: Demand Statistics, Demand Planning and Demand Consensus, each of which is supported by numerous sub-processes.
Figure 1: The Plan4Demand Demand Excellence Model
Demand Statistics focuses on best-quality statistical forecast generation, data management and measurement. Demand Planning centers on obtaining the best judgmental input, assembling assumptions and integrating new activities plans (like promotions and new products) into the demand plan. Finally, Demand Consensus is concerned with building a one-number plan and integrating the Demand Planning process into the entire organization.