Oliver Wight logo

Imagine the possibilities,
realize the potential

Realising the Full Potential of Demand Planning : Part 1

23 Jul 2018


Blog
blog graphic with linear cogs depicting a demand plan

In this two-part blog series, we explore how the longer-term demand plan should play a more prominent role in businesses. In this first part, we look at the key elements in setting up the demand planning and forecasting process, which is a critically important ‘front end’ of not just supply chain planning processes, but planning for the entire business.

We detail five key elements of demand planning below to provide readers with an insight into realising the full potential of the demand plan and how it can contribute to long-term business success:


1. Make sure the monthly management process horizon is at least a rolling 24 months
When it comes to demand planning, many companies only focus their time on the next month; maybe even only the next quarter. A better approach is to ensure the monthly review cycle has at least a rolling 24-month horizon. In this way, the senior team gets a view of next year’s plan in full,providing them early warning of any issues and freeing them up to focus on strategy. 


2. Assign responsibilities for each layer of planning
For a successful demand plan, there should be an annual planning cycle, which (re) aligns the longer-term strategic plans (usually five to 10 years), agrees a more detailed business plan for the next three years, and then aligns the annual budget to the lower-range aspirations. Everyone in a company needs to know about strategy and it is the Lead Team’s responsibility to develop the strategic plan and cascade it down to the rest of the business.


3. Ownership and accountabilities defined 
To get the right level of input and perspective, it is important to define who owns which horizon and to what level of detail. In ownership of the higher level, longer-term forecast is the responsibility of the most senior sales and marketing roles, while the bottom level focuses on execution. Depending on how big the organisation is, there can be a cascade of ownership, defined by an increasing level of detail, as the horizon becomes shorter and closer to ‘the here and now’.


4. Spend more than 75% of the time in the monthly management meetings on the four to 24-month horizon
Senior marketing and sales managers should routinely spend one-to-two hours a month reviewing the 24-month demand plan and measure where time is spent. The key parameters can be easily documented in a simple spreadsheet to measure the following:

- Data accuracy/integrity and process integrity discussions – there should be no time spent on these topics
- Assumption performance and key metrics – ideally this should be about 15% of the time
- The short term, i.e. next three months – ideally this should be no more than 10% of the time
- The next 12 months and this financial year – ideally about 35% of the time
- Months 13 to 24 – ideally about 40% of the time


5. Consensus Demand Planning
For tangible results from consensus demand planning and to truly arrive at a consensus within a business, the process needs to have three essential criteria:

1. The individual forecasts must be done in isolation and derived from those forecasters’ perspectives.

2. Key drivers or underlying assumptions have to be documented to describe the thinking behind how the numbers and plans were generated.

3. The consensus is reached by rigorous challenge and debate about the different sets of assumptions and perspective, not the actual numbers themselves.

Each of these inputs needs to be quantified and time-phased, so there can be an ‘apples-to-apples’ comparison. A good starting point is to set up different views for Sales and Marketing, and add statistical forecasting projections to anchor the plans, such as a Sales forecast by ‘A’ SKUs, by customer, for the first six months – the bottom-up forecast for example. The important point is to debate the ‘thinking’ behind the numbers, not the numbers themselves.

To summarise, in order for demand planning to be effective and embraced across an organisation, the critical elements are to ensure there is an ‘anchor’ as a starting point, ownership is defined for both horizon and level of details, and multiple perspectives are not only allowed for, but encouraged, before coming to a consensus on best possible demand plans based on the knowledge we have at hand today.


In Part 2, we will explore what to do with the demand plan once the process is embedded in the business.

This blog has been taken from our latest whitepaper, Realising the Full Potential of Demand Planning | Part 1: The Mechanics of Good Process. Download for free here.

Share buttons:

Rod Hozack

Partner at Oliver Wight Asia Pacific

Based in Sydney, Australia, Rod has 15 years hands-on experience in the pharmaceutical industry and consulting, and is an accomplished strategist, with proven record of effective implementations that deliver tremendous value for his many blue-chip clients, which include Abbott Laboratories, British American Tobacco, Caterpillar, and Wrigley’s .

LinkedIn
© 2018 All rights reserved. Website designed by RONIN Marketing