People-Focused Solutions to Demand Planning
Minor Communication Errors Lead to Excess Inventory
Even a well-defined sales and operations planning (S&OP) process contains knowledge gaps that reduce demand plan accuracy. Over time, these small errors lead to a costly buildup of inventory.
Inconsistent communication between Sales, Planning, and Supply chain
Failure to collect sales forecasts from large, repeat customers
Demand forecasts do not incorporate historical sales trend
Reduce Inventory With Improved Communication
I provide simple process changes that ensure consistent, reliable communication throughout your planning cycle. I’ve been through this before, and can help you quickly adopt best practices in these areas:
- Identify communication gaps between your customers, sales team, demand planning team, and supply chain.
- Design a transparent and repeatable planning process that encourages collaboration among your key functions.
- Measure the accuracy of your existing process and identify achievable savings targets through inventory reduction.
My Recent Articles
The Demand Planner: Planning Team Quarterback
S&OP Horror Story: In One Explainer Video
Data Gold Mine: Average Inventory by Industry
Intersection of Relational and Technical Skills
How I Compare
• Complex, lengthy engagements
• Large and expensive team
• Intimidating style
• Templated one-size-fits-all method
• Upsell you on other services
• Simple fixes to your plan process
• Small team (it’s just me here)
• Dignified demeanor
• Personalized solution tailored for you
• Demand Planning specialty
• Algorithm based
• No support for people / processes
• Technical support only
People-Focused Approach to Demand Planning
My Approach: Holistic Review of Planning Process
Define Cross-Functional Plan Team
Most issues in the demand planning process are due to teams not working effectively each other. The sales team is often frustrated with inadequate product supply. Similarly, manufacturing leaders struggle getting an accurate forecast of product demand.
Together, we define a core project team comprised of key stakeholders for the existing sales and operations planning process. We define functional owners for each area, and agree to a framework under which we share information.
Transform Your Planning Process
First We Measure
I begin by measuring the forecast error of the existing demand planning process. I use standard metrics to calculate both forecast error and bias. Together with the team, we identify areas that contribute to forecast error.
Then We Solve
Once we identify sources of forecast errors, we develop simple options for solving. It is often as simple as defining consistent rules, such as when we include the impact from a recent sales win into the demand plan.
With a clear team and process, we are certain to increase the accuracy of the demand planning process.
Example of My Work
Problem: Excess Inventory, Unfilled Orders
Inventory is spiraling out of control at a large industrial business, but customers are still waiting months for unfilled orders.
My Approach: Audit the Entire Process
I learned how the sales team built the sales pipeline, and at what point in the sales cycle they declared wins.
I met with the planning team to see how they created the demand forecast. How did they include the sales pipeline? What tools did they use to spot trends?
The plant controller provided the production (supply) plan, as well as details of existing inventory that was near expiration.
My Findings: Multiple Issues Creating Excess Inventory
I identified a number of items that each added forecast error.
Collectively, these errors created a production plan that was only 25% accurate. This created massive inventory levels for some products, while other products were constantly out of stock.
How I Add Value
The demand plan is often built in silos, with little coordination between the sales leaders and operations teams.
As a result, there is no shared ownership of the demand plan, and no incentive to improve the planning process in future periods.
How I Help:
I partner with you to build an effective planning cycle, referred to as the sales and operations planning (S&OP) process.
Together, we develop a common framework of communicating components of the plan among the team, and establish process owners and controls for the planning process.
with Business Partners
Because the demand planner role is highly analytical, employers often overlook the collaborative aspect of this role.
A successful demand planner is perpetually facilitating dialogue with the sales team, plant controller(s), and business leadership.
How I Help:
We redefine the scope of the demand planning role in your business. Together, we ensure this role is granted a strong voice in supporting the demand plan going forward.
When needed, I can serve as an interim demand planner as a means to establish appropriate process and controls in this function.
The effects of improved demand planning are spread across the business, yielding less inventory waste and higher customer fill rate.
Because it is hard to quantify, many businesses don’t realize the cost of a poorly-executed demand planning process.
How I Help:
I measure the savings potential from a robust demand planning process, and partner with you to establish savings targets achievable with a formalized sales and operations planning process.
I then execute a savings program that drives savings from the following:
- Lower inventory waste
- Reduced warehouse usage
- Higher order fulfillment
- Higher plant utilization
Demand Planning as Unique as Yourself
Your business thrives because of its unique identity.
I provide demand planning consulting to a variety of businesses, each of which is special in its own way. Planning is so much more than a statistical calculation on a spreadsheet. It embodies key elements of your business, such as customer behavior and sales team motivation.
I seek to understand the underlying behavior that drives product demand, and help you build a forecasting process tailored to your unique culture. In doing so, I will dramatically improve the accuracy of your demand plan, resulting in lower inventory and higher customer fill rate.
I Will Always:
- RECOGNIZE your uniqueness
- LEARN your sales cycle
- IDENTIFY customer order patterns
- DISCOVER cause of forecast misses
- DESIGN a plan process that works for you
- VALIDATE forecast results
I Will Never:
- FORCE a generic solution
- MANDATE changes to your systems
- ASSUME a statistical tool can completely explain your business
Reduced Waste and Higher Sales
Why Demand Planning is Important
I once had a manager who frequently reminded us that inventory was evil. It cost to build, store, transport, and dispose. He recognized inventory management is a huge drag on company resources.
In fact, it costs $20 per year to maintain $100 of inventory, as storage and handling costs are super expensive. It is estimated it costs $2 each time an employee touches inventory, and it costs even more when that inventory is transported between locations.
Eliminate Expired and Obsolete Inventory
An average of 4% of all production is scrapped due to expired and obsolete inventory. For a business with $100 million in sales and 50% gross margin, inventory waste would represent an annual expense of $2 million. Effective demand planning can nearly eliminate expired and obsolete inventory, resulting in a dramatic improvement in inventory waste.
Across industries, the average customer fill rate is 95%. Said differently, 5% of all customer orders are delayed due to insufficient on-hand inventory. Many of these orders will get cancelled, as customers will elect to use alternate vendors.
A robust demand planning approach will yield higher customer fill rate, resulting in fewer cancelled orders. By increasing customer fill rate even marginally, a business could potentially increase sales by 3-5%.