10 Best Practices to Boost Demand Planning Performance

Effectively managing demand means effectively managing people, process and technology

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By Steven LaVoie

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It's what keeps supply chain executives up at night. After months of preparation, your special promotion is underway. Will it go according to plan, with demand and supply in the right balance? If not, you risk frustrated store managers, unhappy customers and loss of profit due to stock outs. Or miscalculate in the other direction, and margins will slip away as inventory becomes obsolete.

Either way, it's a real problem. Fortunately, it's one you can tackle head on with effective demand planning.

Driving Value through Demand Planning

Demand planning has emerged as the key differentiating factor to protect margins and build market share in this highly competitive environment. Whether for unique events such as limited-time-offers (LTOs) and product rollouts, or for ongoing efforts, effective demand planning affects the overall health of the organization.

Let's take a look at 10 demand planning best practices. None of these can truly be categorized as "quick fixes," but partners working with my company, ArrowStream, have found that the results more than justify the effort. Companies throughout our foodservice network have realized increased efficiencies and bottom-line benefits from these principles, and you can, too.

Demand planning touches every part of the organization: people, process and technology.

People: Aligning Cross-functional Resources

1. Tighten Up Objectives. It's true in business as well as in life: trying to do too many things at once is a guaranteed path to doing none of them well. An excessive (or undefined) list of goals only serves to muddle a project and confuse your team. Choose one or two primary objectives for your initiative and focus all your efforts on achieving those. For example, a restaurant chain might center a demand planning objective specifically on driving traffic via an LTO rather than multiple goals covering market share, repeat visits or profit margins.

2. Come Together, Right Now. No, you don't have to sing "Kumbaya" in the break room, but you do need to ensure that your marketing and supply chain teams are speaking the same language. Each team plays a critical part, but myopic perspectives and poor communication can derail a project before it even begins.

Insist upon formal interaction between your research, marketing and supply chain teams before, during and after a rollout. Additionally, cross-train all participants on each other's roles. You'll not only improve accuracy and timeliness, you'll also discover that the whole is worth more than the sum of its parts.

3. Plan from the Inside-out. Don't limit demand planning strategy to your own organization. Engaging your trading partners in a collaborative process generates mutual benefit. Too often, information protectionism creates unnecessary barriers and unforeseen roadblocks. When distributors, manufacturers and retailers openly share data and best practices, profits increase for all. It's as simple as that.

4. Get to Know Your CFO. The responsibilities and analytical skills of today's CFO are a natural fit for driving cross-functional execution. Your CFO offers deep expertise in risk management, logistics and technology — factors that contribute significantly to streamlined supply chain operations.

By the same token, with increased involvement, CFOs gain significant business insight as well as:

  • the ability to more accurately predict profitability;
  • a tool for better understanding and reducing risk;
  • a direct way to improve cash flow management.

Process: Calibrating Actions to Goals

5. Network Your Way to the Top. Leveraging a supply chain network creates economies of scale in loading, shipping and storage. Not only can trading partnerships lower costs, they can also improve reaction time and flexibility to respond to evolving customer demand. For example, ArrowStream's Network consists of over 4,000 trading partners, 32,000 lanes and 8,800 shipping locations. One of our larger customers, ARCOP (Arby's Supply Chain Cooperative), uses our on-demand supply chain software solution, fueled by the Network. In the first year, they effectively managed a 300 percent increase in new SKUs — without adding employees.

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6. Use Metrics that Matter. Make sure metrics are relevant by gathering input up front from subject matter experts across departments. Then, establish a process and timeline to monitor, measure and report on them. Among my company's clients, for example, key metrics include maintaining service levels while minimizing inventory obsolescence and stockouts, as well as reducing total delivered price. When integrated into the demand planning process, data points such as these provide accountability throughout the organization.

7. Understand the Broader Perspective. Too often, the terms "demand planning" and "forecasting" are used interchangeably. Organizations that recognize that forecasting is just one element of demand planning benefit from a more holistic view of a process that extends well beyond the boundaries of financial projections. Demand planning takes nearly as much art as science, and it is not a linear process. Optimizing success requires access to multiple data points throughout the operation and supply chain and an understanding of the full impact on operations and resources.

Technology: Achieving Clarity through Information

8. Scrub Your Data. Not only are inaccurate supply chain data useless, they also create waste, undermine objectives and create institutional distrust. The responsibility for clean data belongs to everyone, not just to IT. You may need to invest in outside resources for a systematic, mass clean-up effort and to develop "carrot-and-stick" incentives to keep data integrity atop the priority list.

9. Build a Better Technology Environment. I'm constantly surprised at the infrastructure behind many national, successful companies. Dated legacy systems, point solutions and labor-intensive manual tracking abound. Even though "that's the way we've always done it," companies that have not optimized their IT environment run the risks of wasting resources, losing data reliability and creating silos among trading partners.

In contrast, advanced technology that enables real-time visibility into the supply distribution chain provides major benefits:

  • demand data can be evaluated — and adjustments made — more quickly;
  • historic views can reveal pitfalls and opportunities for future planning;
  • true data integration can be achieved between users (i.e. restaurant chains in our business), distributors and manufacturers.

10. Use It or Lose It. Advanced supply chain systems should incorporate at-a-glance dashboards and performance management tools. While comprehensive data-dives have their time and place, putting accessible information at executives' fingertips enables swift and educated decisions. With a hosted, software-as-a-service solution, you can add significant functionality without adding overhead costs or capital investments.

Start Today for Compounded Benefits

Demand planning deficiencies become most evident at the end of your supply chain, but they impact profitability and efficiency at every stage along the way. Even incremental improvements deliver compounded benefits, from increased cost control and faster time-to-market to stronger partnerships and positive brand awareness.

Strong demand planning delivers benefits in terms of cost and revenue. On the cost side, it drives inconsistency, waste and complexity out of the supply chain — saving time and money. On the revenue side, it increases sales and customer satisfaction. The bottom line: You gain a better competitive position and satisfied investors with effective demand planning. ¦

About the Author: Steven LaVoie is chairman and CEO of ArrowStream, a provider of supply chain solutions for the foodservice industry. More information at www.arrowstream.com.