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Deep Dive Into Demand Planning
 

Deep Dive Into Demand Planning

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A more in-depth review of Demand Management, and how it is more than just Forecasting.

A more in-depth review of Demand Management, and how it is more than just Forecasting.

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    Deep Dive Into Demand Planning Deep Dive Into Demand Planning Presentation Transcript

    • Demand Management Keys Strategies to Become More Demand Driven
    • Demand Management Keys
      • Outline:
        • Identify Three Areas of D. M. Concentration
        • Detailed Review of Each Area
        • Pressures, Actions, Capabilities, Enablers (PACE) Framework
        • Categories of Performance Criteria
        • Demand Management Realities
        • Steps Toward Improvement
    • Demand Management Keys
      • This Presentation is a Deeper Dive Into The Keys for Successful Demand Management in a Global Economy
      • We will Concentrate on Three Areas:
      • Best In Class Performance Benchmarking
      • A Competitive Maturity Assessment
      • Required Actions to Improve Demand Management Performance
    • Demand Management Keys
      • Part 1: D. M. Performance Benchmarking
      • 3 Focus Areas in D. M. Performance Improvement:
      • Strategic Alignment
        • Starts With One Set of Numbers
        • Align Sales’ Goals With Demand Planning in the Area of Performance Metrics
      • Collaboration
        • Obtain Accurate Demand Signals From Customer Base Through a Win-Win Collaborative Business Process
        • Internal Collaboration (S&OP) is Critical to Success
    • Demand Management Keys
      • Part 1: D. M. Performance Benchmarking
      • 3 Focus Areas in D. M. Performance Improvement (cont.):
      • Responsiveness to Demand Fluctuations
        • Incorporate the Impact of External Events Into the Demand Management Process
        • Distance of the Producer From Their Customer Directly Affects the Ability to be Responsive
        • Promotions & Demand Shaping Events Become Critical, Especially When Located Close to the Customer
    • Demand Management Keys
      • Part 1: D. M. Performance Benchmarking
      • Top D. M. Pressures and Strategic Actions
      Pressures Strategic Actions Meeting Customer Service Expectations Improve Internal Collaboration (Forecasting, Pricing, Promotions) Rising Costs (Transit, Logistics, Inv. Carrying Costs, etc. Customer Level Forecasting for Key B2B Customers High Uncertainty in Demand Create Tighter Feedback From POS to Demand Plans Maximize Mfg. Efficiency Improve External Collaboration by Including Inventories & Capacities Product Lifecycle Management Focus on Statistical Forecasting (Starting Point)
    • Demand Management Keys Part 1: D. M. Performance Benchmarking Source: Aberdeen Group – Process Industries Maturity Class F/G Inv. Turns Customer Service Gross Profit Forecast Accuracy Top Performers 17 96% 35% 81% Average Performers 7 85% 20% 69% Poor Performers 3 65% 5% 45%
    • Demand Management Keys Part 1: D. M. Performance Benchmarking
      • Top Performers PACE Framework – P ressures, A ctions, C apabilities, E nablers
      • Supply Chain Pressures :
      • Rising Supply Chain Costs (Transportation Costs, Logistics Operation Costs, Inventory Carrying Costs, etc.)
      • Top Performers’ Actions in Response to Pressures:
        • Improve Internal Collaboration Process for Forecasting, Pricing & Promotion Plans, and Making Mid-Course Corrections
    • Demand Management Keys Part 1: D. M. Performance Benchmarking
      • Top Performers PACE Framework – P ressures, A ctions, C apabilities, E nablers
      • Top Performers’ Actions in Response to Pressures (cont.):
        • Do Customer Level Forecasting to Improve Customer Service to Key Customers
        • Improve External Collaboration to Incorporate Trading Partners’ Inventory & Capacity into Demand Planning
        • Create Tighter Feedback Loop from Marketing Activity to Demand Assumptions & Plans (Esp. CPG Industries)
    • Demand Management Keys Part 1: D. M. Performance Benchmarking
      • Top Performers PACE Framework – P ressures, A ctions, C apabilities, E nablers
      • Top Performers’ Capabilities to Perform Required Actions:
        • Ability to Forecast Based on Attributes (Volume, Quantity)
        • Create a Single Demand Forecast with Inputs from Multiple Areas Within the Organization
        • Ability to Segment Demand Forecasts Based on Key Product-Customer Characteristics
    • Demand Management Keys Part 1: D. M. Performance Benchmarking
      • Top Performers PACE Framework – P ressures, A ctions, C apabilities, E nablers
      • Top Performers’ Capabilities to Perform Required Actions (cont.):
        • Ability to Make Rapid Product Introduction Decisions
        • Ability to Create a Single Demand Forecast Based on Data from Multiple Organizations Within the Value Chain
        • Ability to Measure Forecast Accuracy at Customer, Family, and SKU Levels
    • Demand Management Keys Part 1: D. M. Performance Benchmarking
      • Top Performers PACE Framework – P ressures, A ctions, C apabilities, E nablers
      • Top Performers’ Enablers to Perform Required Actions:
        • Statistical Forecasting
        • Forecasting Collaboration
        • Alert Management
        • Demand Analytics
        • Demand Shaping (Consumer-Centric Companies)
    • Demand Management Keys
      • Part 2: D. M. Competitive (Maturity) Assessments
      • Five Categories of Performance Characteristics:
        • Process (Execution of Daily Operations)
        • Organization (Corporate Focus & Collaboration)
        • Knowledge Management (Organizing Data for Key Users)
        • Technology (Effective Selection & Deployment of Tools)
        • Performance Management (Measure & Improve Results)
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments Process Performance Level Single Demand Forecast w/Inputs from Multiple Roles in Org. Segment on Key Product-Customer Links Rapid Product Intro. Decisions Convert Forecasts from Product Family to SKU Level Top 40% 36% 36% 46% Average 23% 22% 15% 25% Poor 10% 21% 6% 20%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Process (Cont.)
      Performance Level Forecast Based on Attributes (volume, quantity) Collaborate with External Trading Partners Collaborate with Internal Stakeholders Top 50% 33% 37% Average 28% 13% 23% Poor 9% 11% 10%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Organization
      Performance Level Sales Organization Involved in Forecasting Clear Owner for Consensus Forecast Top 37% 32% Average 23% 29% Poor 20% 21%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Knowledge (Data Management)
      Performance Level RFID Technology Currently in Use Top 77% Average 58% Poor 44%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Technology Enablers
      Performance Level Statistical Demand Forecasting Forecast Collaboration Alert Management Demand Analytics and Reporting Top 82% 73% 50% 59% Average 53% 33% 24% 28% Poor 42% 10% 8% 18%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Performance Management
      Performance Level Ability to Measure End to End Planning Lead Times Ability to Measure Forecast Accuracy at the SKU Level Ability to Measure End to End Order to Delivery Lead Times Top 37% 50% 41% Average 12% 23% 22% Poor 10% 21% 19%
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Process Keys Affecting Consumer-Centric Companies
      • Requirement to Handle Pricing Strategies to Maximize Revenue (Moving Target)
        • Balancing Act Between the Correct Price Point and Quality Requirements
      • Ability to Include Demand Lift From Promotions or Causal Events into Demand Forecasting
        • 54% Of Consumer-Centric Companies Feel Demand Shaping is a Must-Have Process Requirement
        • Examples of Causal Events Include: Exhibitions, Festivals, Economic Policy Changes, Back to School, Christmas, Halloween, Weekly Flyers, Catalogs, Anticipated Competitor’s Move, etc.
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Organization Keys Affecting Most Companies
      • Achieving a Single Demand Forecast for the Entire Organization is a Major Challenge
        • Gaining Additional Granularity & Accurate Data is at the Core of the Challenge
        • Single Demand Forecast is More of an Organizational Change vs. Technology
        • Senior Management Support is Vital for Success (Tied to Performance Measurements)
        • Useful to Demonstrate the Negative Effect on Customer Service, Inventory, Profits w/Multiple Forecasts
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Performance Measurement & Technology Keys
      • Top Performing Companies are 3 Times More Likely to be Able to Measure SKU-Level Forecast Accuracy
        • Reflects Processes in Place to Disaggregate Financial Budgets and Product Family Forecasts to SKU Level
      • Technology Alone is Not A Demand Management Panacea, But the Depth of its Use is A Key
        • Refers to Leveraging Tools Beyond “Out-of-the-Box” Statistical Forecasting to Support Collaboration, Disaggregation, and Customer Level Forecasting More Than Utilizing all Functional Capabilities
    • Demand Management Keys Part 2: D. M. Competitive (Maturity) Assessments
      • Demand Management Realities:
      • Spreadsheets are Still Very Common
      • Top Performers Are Twice as Likely to Use Best of Breed Solutions
      • Top Performers Are 1.5 Times as Likely to Use Business Intelligence Tools to Enhance D. M.
      • Top 5 Barriers to Improved Demand Management:
        • Lack of Consensus
        • Functional Silos
        • Customer Data Not Timely
        • Abnormal Demand Distributions (Modeling is Difficult)
        • No Customer Collaboration
    • Demand Management Keys Part 3: Required Actions to Improve Performance
      • Poor Performers’ Steps to Success:
      • Drive/Push/Move to a Single Operational Demand Forecast With Internal Collaboration
      • Move from Spreadsheets to Demand Forecasting Technology, Especially for Key Profit Regions or Major Customers
      • Create a Structured End-to-End Planning Workflow (Based on Complexity, Service Levels, Manufacturing Processes, etc.)
    • Demand Management Keys Part 3: Required Actions to Improve Performance
      • Average Performers’ Steps to Success:
      • Expand Demand Collaboration to Key Customers in an Effort to Push to a Collaborative Demand Forecast
        • Forecasts Based on Shipment History May Inflate Inventories
      • Leverage Demand Forecasting Investments By Pursuing Automated Workflow and Decision- Making Technologies
        • Statistical Forecast Should be Considered a Baseline
        • Consider More Frequent Forecast Cycles (At Least Monthly)
      • Create Customer-Level Forecasts for Key Customers
        • Perform Paretto Analysis to Find Most Profitable Customers
    • Demand Management Keys Part 3: Required Actions to Improve Performance
      • Top Performers’ Steps to Success:
      • Implement Attribute-Based Forecasting Processes
        • Planners May Benefit From Seeing Demand in Terms of Color, Weight, Region, Distribution Channel, etc.
      • Evolve Towards Short Term Forecasting
        • Dynamic Categories Such as Apparel, Food/Beverage, CPG May Require More Frequent Forecasts to Recognize Events
      • Clearly Identify the Impact of Globalization
        • More Customers (and Production) Spread Geographically Spreads the Sales Profile & Makes it Difficult to Differentiate Products, Pricing, Customer Service
    • Demand Management Keys
      • Review:
        • Deep Dive Into Demand Management
        • Performance Benchmarking
        • Maturity Assessment/Comparisons
        • Consumer-Centric Keys
        • Demand Management Realities
        • Outlined the Path to Successful Demand Management