The 5 Keys to Demand Planning Success
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The document outlines the essential keys to successful demand planning, emphasizing the importance of separating demand by type, establishing accountability, utilizing statistical forecasts, fostering collaboration, and maintaining real-time visibility across the business. It highlights that effective demand planning is critical for developing financial forecasts, setting market expectations, and integrating with the sales and operations planning process. Additionally, it discusses strategies for managing different demand streams and the role of collaboration in enhancing demand planning accuracy.
The 5 Keys to Demand Planning Success
- 1. 1© 2014Steelwedge Software, Inc. Confidential. Single Line of Sight: Plan, Perform, Profit The 5 Keys to Demand Planning Success April 29, 2014
- 2. 2© 2014Steelwedge Software, Inc. Confidential. Today’s Presenter Background Doug Dedman brings more than 20 years of services, operations, supply chain planning and S&OP expertise to Steelwedge. Prior to joining Steelwedge, Doug spent 18 years at DBM Systems. While there, he was responsible for the development and growth of a global Sales and Operations Planning (S&OP) consulting practice that specialized in helping multinational corporations develop effective executive S&OP processes. He also held roles in General Management, Program Management and operations and supply chain consulting. Doug has also served in the role of Senior Director Customer Management at Steelwedge, with responsibility for executive sponsorship and overall customer satisfaction and project quality. He holds a bachelor of arts in Honors Economics from the University of Waterloo as well as an MBA from the Odette School of Business. Doug Dedman VP, Global Services SteelwedgeSoftware Inc. 3825 Hopyard Rd Pleasanton, CA 94588 Tel : (949) 460-1700 ddedman@steelwedge.com
- 3. 3© 2014Steelwedge Software, Inc. Confidential. Introduction Separating Demand by Demand Type EnsuringAccountability For Demand Plan Prudent Use of Statistical Forecasting Collaboration Real Time VisibilityAcross Business Summary and QA Agenda
- 4. 4© 2014Steelwedge Software, Inc. Confidential. What is the purpose of Demand Planning? • Input into developing a Financial Forecast • Develop an unconstrained market driven Booking and Shipment Plan • Set targets to meet market expectations • lead time, product offering, pricing, service etc. • Set targets for operational buffers • Backlog and Finished Goods Inventory • Input and Output of S&OP process • Constrain or increase the Demand Plan based on S&OP feedback (supply plan) – shape demand
- 5. 5© 2014Steelwedge Software, Inc. Confidential. What are the Keys to Demand Planning Success? 1. Separating Demand by Demand type 2. Ensuring Accountability for Demand Plan 3. Use Statistical Forecasts where appropriate 4. Collaborate to develop the Demand Plan 5. Real time visibility across business
- 6. 6© 2014Steelwedge Software, Inc. Confidential. Demand Streams
- 7. 7© 2014Steelwedge Software, Inc. Confidential. Demand Streams • Break the Demand Plan into streams based on: • Demand characteristics • Accountability Purpose To better understand your demand Result Improve the accuracy of your future plans
- 8. 8© 2014Steelwedge Software, Inc. Confidential. Demand Streams • Typical breakdowns: • Region (Geography) • Normal vs. Abnormal Demand (Flow vs. Project) • Distribution Centre vs. Direct • Large Customer(s) versus Small Customers
- 9. 9© 2014Steelwedge Software, Inc. Confidential. Demand Streams • Demand characteristics may be different by stream • Seasonalityand/or Order Cycles • Normal vs. Abnormal Demand • IntelligentDemand • Major Customer • Product mix may be different by demand stream • Specific items for specific customers • Demand Planning tools should support: • Bringing demand streams in from different sources: CRM, Customer Collaboration,MRO demand • Supportaccuracy measurementby stream • Supportcollaborationand consollidation
- 10. 10© 2014Steelwedge Software, Inc. Confidential. Insert SPB screenshots here Link to ESOP Opportunity Pipeline via Sales Pipeline Bridge on Opportunity Pipeline for S&OP Planning
- 11. 11© 2014Steelwedge Software, Inc. Confidential. 2.42 Acct Mgr RE Laptops Max Stores-M Opportunity Pipeline via Sales Pipeline Bridge on Opportunity Pipeline Detail
- 12. 12© 2014Steelwedge Software, Inc. Confidential. Confirmed S&OP Sales Plan
- 13. 13© 2014Steelwedge Software, Inc. Confidential. Consolidating Demand Streams Sum up the demand stream plans for the Executive Meeting CRM (Region 1) CRM (Region 2) CRM (Region 3) Flow Demand Demand Plan (Region 1) MU - Spain Demand Plan (Region 2) MU - Turkey Flow DemandFlow Demand Demand Plan (Region 3) MU - UK Consolidated Demand Plan (Center Node) (ENPE) 5-Section Sheet (Center Node) (ENPE) Detail Level for Demand Cycle Detail Level for Executive Meeting
- 14. 14© 2014Steelwedge Software, Inc. Confidential. Demand Streams • Breaking out demand streams allows better management of the demand plan • Statistical forecast where applicable • Intelligent schedules where applicable • CRM based project forecasts where applicable • Breaking out demand streams allows you to assign accountability • It won’t improve unless a specific person is responsible and accountable • Measure accuracy at this level in the demand cycle of S&OP
- 15. 15© 2014Steelwedge Software, Inc. Confidential. Holding Accountability to Demand Plan
- 16. 16© 2014Steelwedge Software, Inc. Confidential. A Common Organizational Challenge! In Order to improve Demand Planning, I need to hold someone accountable for the demand plan! Why is this so difficult?
- 17. 17© 2014Steelwedge Software, Inc. Confidential. Accountability • Need to measure demand plan on something that is not a shared result: • Bookings - Output of Sales/Marketing(Demand Side) • Shipments – Result of demand (orders) and supply (inventory, production) • Need to measure at a level of responsibility • Region • Customer • Distribution/Direct • Breaking out demand streams allows you to assign accountability • It won’t improve unless a specific person is responsible and accountable • Measure accuracy at this level in the demand cycle of S&OP
- 18. 18© 2014Steelwedge Software, Inc. Confidential. Accountability Includes Measurement of Change • Need ability to see change in plan (month over month) • Drill down as required to see what caused change: • product/customer/demand planning role • Accountability not only includes accuracy but net change • Tie measurement back to supply capability What is the impact of downturn in demand one month out?
- 19. 19© 2014Steelwedge Software, Inc. Confidential. Example Customer: Program Objectives and Deliverables
- 20. 20© 2014Steelwedge Software, Inc. Confidential. Example Customer: Quantitative Assessment Target Savings: $5M - $10M per $1B in revenue Inventory Reduction 10-20% reduction through more accurate demand plan Customer Satisfaction 10-30% improvementin customer satisfaction through reduced stock-outs Demand Plan Accuracy 15-30% improvementthrough collaboration Planning Cycle Time 50-70% reduction via integration and process automation Revenue and Margins 5% lift through reduced stock-outs and better cost management
- 21. 21© 2014Steelwedge Software, Inc. Confidential. Use Statistical Forecast to Improve Demand
- 22. 22© 2014Steelwedge Software, Inc. Confidential. Normal Vs. Abnormal Demand • Normal Demand – past performance (mix and volume) is a good indicator of Future Forecast - FLOW • Statistical forecast based on history • Modified by future plans – promotion, price change, new markets • Abnormal Demand – a single transaction drives a significant portion of business - PROJECT • Past sales are not an indication of future sales – lumpy demand – Forecast on a case by case basis – Use an Opportunity ManagementProcess - CRM • Historical mix ratios will not apply • May include more than one product family “Manage” the Projects - “Forecast” the Flow.
- 23. 23© 2014Steelwedge Software, Inc. Confidential. Normal Vs. Abnormal Demand • Types: • Flow vs. Project • MRO vs. Project • Flow vs. New Distribution Center • Domestic vs. Large Export • Regular vs. Lumpy • Trying to statistically forecast the right hand side is extremely difficult and may give misleading results • Break the demand planning into the different inputs and run forecast against items on the left Keep in Mind: You will most likely have different fulfillment strategies based on the type of demand.
- 24. 24© 2014Steelwedge Software, Inc. Confidential. Identifying Abnormal Demand • Determine the “size” of opportunity that is abnormal • Evaluate historical bookings to determine order size relative to volume • Find the balance between: – Number of opportunities – Large opportunities that upset the normal supply flow If in doubt, pick a lower number of opportunities to manage.
- 25. 25© 2014Steelwedge Software, Inc. Confidential. Statistical Forecast Analysis • Understandthe quality of the demand data, i.e. active periods, sparse, etc. • Generatemultiple hierarchy level forecasts and analyze results • Understandthe forecast error by levels, i.e. MAPE and Weighted MAPE • Assess the forecast growth and inflation • Recommend the optimal forecast level
- 26. 26© 2014Steelwedge Software, Inc. Confidential. Product Segmentation Analysis – Demand Policy Take the efficient approach - Understand complexity and its impacts Volatility Impact Statistical Forecast Collab & Exception Stocking Strategy: Min/Max, Safety Stock, etc
- 27. 27© 2014Steelwedge Software, Inc. Confidential. Demand Policy
- 28. 28© 2014Steelwedge Software, Inc. Confidential. Collaboration
- 29. 29© 2014Steelwedge Software, Inc. Confidential. Why Collaboration? Demand Planning is an Integral Part of S&OP. S&OP is a collaborative process to arrive at a balanced demand and supply plan. Using collaboration to arrive at Demand Planning provides a better signal to the S&OP/IBP process S&OP Strategic Plan Master Schedule Demand Plan Production and Material Plan Three to five year strategic plan for the family. Typically updated annually 12 month or more, rolling plan from the family. Updated monthly 12 month or more, rolling demand plan for the family. Updated monthly Detailed schedule for specific items in the family. Authorized by the S&OP production plan. Typically updated daily or weekly. Detailed production and material plans linked directly to the master schedule. S&OP
- 30. 30© 2014Steelwedge Software, Inc. Confidential. Why Collaboration is important? • Demand Planning is about predicting future results. • Because we are dealing with the future, by definition we will be wrong! • You want to use the best information possible to develop the demand plan – pull in from multiple sources. • Examples of Collaboration • Customer Collaboration • Partner Collaboration • Internal Collaboration – Multi-level demand plan – Vertical integration
- 31. 31© 2014Steelwedge Software, Inc. Confidential. Collaborative Business Planning Process GoPro S&OP Sales Demand Planning Sales Manager Forecast Demand Forecast Inputs Account Forecast Sales Orders Master Data Customer Data Sales Territory Forecast Demand Review Consensus Forecast Planning Processes Transaction Files Marketing Demand Planning Account Manager Sales Management Sales/Ops Consensus Exec S&OP Inputs & Outputs Consensus Forecast Historical Demand Analysis Performance Current Plan Finance Waterfall KPI Dashboard Collaboration S&OP Sales S&OP Ops Executive S&OP Collaboration Marketing Forecast New Product Forecasting SOFE Forecast Locked Consensus Forecast Locked Consensus Forecast
- 32. 32© 2014Steelwedge Software, Inc. Confidential. Screen Shots – Account Manager
- 33. 33© 2014Steelwedge Software, Inc. Confidential. Screen Shots – Sales Manager
- 34. 34© 2014Steelwedge Software, Inc. Confidential. Screen Shots – Sales Ops
- 35. 35© 2014Steelwedge Software, Inc. Confidential. Screen Shots – S&OP
- 36. 36© 2014Steelwedge Software, Inc. Confidential. Real Time Visibility Across Business
- 37. 37© 2014Steelwedge Software, Inc. Confidential. Real Time Visibility Across the Business • Demand Planning is one key input to S&OP Process. • Needs to support an S&OP process that is: • Run on a regular monthly cadence • Establishing clear accountability for all plans (demand and supply) • Looking at business by product family – across demand and supply • Link demand plans and supply constraints • A learning process – monthly feedback and continuous improvement • Include Key Business Levers – Bookings,Backlog, Shipments, Inventory,Supply (Production) • Supported by common definitions across the business
- 38. 38© 2014Steelwedge Software, Inc. Confidential. Best Practice Enabled by Technology • Single version of the Truth – from across multiple systems • CRM, Orders, Forecast, Collaborative Demand view • Integration to Finance (Monthly Financial Plan) • Visibility of Budget in process • Measurementof gap to Budget • Use S&OP process to inform budget • Ability to convert between units and dollars – will tell two different stories • Earn and report in dollars – make and sell in units • Ability to analyze data to determine RCA on out of tolerance plans and recognize bias • Capabilityto drill down below family to lower level drivers/issues • Linked to system of record – aligned to execution plan
- 39. 39© 2014Steelwedge Software, Inc. Confidential. Holistic View – Supported by Collaborative Process • Need to view Demand Planning as an input to the overall demand and supply balancing process • Tools need to support integration and timely data access • Eliminate the time required to consolidate and manage data – Utilize this time for analysis
- 40. 40© 2014Steelwedge Software, Inc. Confidential. Outcomes Results/Benefits First time in Company B’s history they are able to view demand in a single source system with a common understandingon how the numbers are generated Challenges and Lessons Learned Sophisticationof their NetSuite ERP solution SW2 project is uncovering gaps in their original ERP implementation Next Phase Multi-Phasedroll out of S&OP Ops, Executive S&OP and Insight Planned in the form of “Release Drops” versus a structured series of individual SOWs
- 41. 41© 2014Steelwedge Software, Inc. Confidential. Recap: Keys to Demand Planning Success. 1. Separating Demand by Demand type 2. Ensuring Accountability for Demand Plan 3. Use Statistical Forecasts where appropriate: 4. Collaborate to develop the Demand Plan 5. Real time visibility across business
- 42. 42© 2014Steelwedge Software, Inc. Confidential. Q&A
- 43. 43© 2014Steelwedge Software, Inc. Confidential.