What is the Role of the Demand Planner?
The Demand Planner is the ‘wide angle lens’ for the planning function. They consolidate forecasts from the sales team, validate forecasts against historical trends, and refine forecasts with input from marketing and business leaders. In short, they own the process of creating a product-level forecast on a recurring basis.
Similar to a quarterback who has the best view of the field during play, they have the broad perspective on both historical trends and sales expectations. Armed with this knowledge, he/she is best positioned to make decisions that affect product supply and inventory management.
Job Functions of the Demand Planner
1. Consolidate Sales Pipeline
The demand planner owns the task of consolidating the product-level forecasts from the sales function. Typically, the sales associates will enter their customer pipeline in a customer relationship management (CRM) tool, such as Salesforce. The customer pipeline is classified into numerous stages, from sales prospects to proposal and through deal closure.
The demand planning process consolidates the sales pipeline into a united forecast of product needs, resulting in summary views easily understood by company management.
2. Review Historical Sales
The demand planner also compares the sales pipeline with historical sales as a test of reasonableness. Does the sales pipeline yield a dramatically different order pattern versus history? Is there a historical seasonal pattern to incorporate when performing demand planning for the company?
For a company in which recurring orders comprise a large portion of the sales volume, it is likely the sales pipeline only includes data for new wins, and not existing/recurring orders. In this case, the demand planning function will need to estimate recurring orders based on historical data and other known factors. Ideally, he/she uses a statistical tool, such as Minitab, to create a regression analysis to aid in predicting inventory needs. They may also use demand planning software, which includes a robust statistical engine that performs advanced analytics. In either case, this employee should be comfortable with using both statistics and technology to analyze historical product usage.
3. Marketing Input: Product Trends
The marketing function can enhance the demand planning activity by providing insight into key industry drivers for the company. As example, they may provide general industry growth rates to incorporate into the long-term forecast.
Marketers also may give input on specific product lines. Their industry research may reveal a specific product feature is gaining market acceptance. They may suggest that upcoming sales forecasts include this impact.
Finally, the marketing function provides critical information about the product portfolio. They know which products are likely to be retired from the product portfolio, and which will be introduced or modified. This information is critical to development of a reliable supply plan, so it is critical the marketers agree with the forecast.
4. Collaborate With Business Leads
It’s critical the business management is included in the process. At a minimum, the general manager and controller should be given an opportunity to provide their input into the sales forecast.
The general manager benefits from seeing how the product-level forecast is aligned with the strategic direction of the company. He/she recognizes the historical investments made to support various product lines. They will want to know whether these investments are paying off. Remember, demand planning provides visibility into the product forecast. This is an opportunity to keep the general manager in the loop on product growth.
The controller will be interested in the profitability of the products being made. For instance, the product forecast may reveal a trend towards lower or higher margin products. This is crucial information for developing the forecast for the company. Second, the controller needs to see the investments needed to build inventory. Since inventory is a key component of working capital, an effective controller will ensure the company has sufficient cash to build inventory.
5. Assembling The Demand Plan
Armed with both a future perspective from the sales function and a historical view of product sales, we can now can finalize the demand planning process for the month. When final, this typically details expected sales for each product variant for the upcoming 12-18 months. Clearly, the demand planner will have a more accurate view for the very near term, while the long-term view will reveal long-term trends.
Depending on the size of the company and number of products in its portfolio, demand planning may either be done on a spreadsheet, or it may require a software solution. In a small business (under $10 million in annual revenue), product sales are likely driven by a small number of customers and is easily managed in an Excel workbook. However, for much larger businesses, the company likely employs a software solution that utilizes advanced statistics to develop models of historical order patterns.
Demand planning is typically executed on a monthly cadence. Each month demand planners compare actual results against forecast sales for that month, and identify causes for inaccuracy in the prior month’s product forecast.
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What Makes a Good Demand Planner?
1. Comfortable With Analytics
Successful demand planners are typically highly analytical and enjoy drawing key conclusions from large sets of data. Frequently, this employee has experience in statistics or math, and is comfortable using technology and statistical models to draw conclusions.
Remember, this position will be interpreting product-level forecasts in both history and future – This represents a lot of numbers to most people, so they should be comfortable working with this level of detailed data.
The demand planner role should be filled with someone who is a good communicator. He/she is generally in charge of facilitating meetings between the sales leaders, business leaders, and manufacturing personnel. As the intersection of these functions, he/she should be comfortable leading meetings and driving productive dialogue.
Many employers don’t recognize the need for a good communicator in this role. Due to the job requirements for managing large amounts of data, hiring managers are frequently looking for strong analytical skill. They overlook the need to fill the role with an employee who can effectively communicate with management.
What is the Career Path for Demand Planners?
High Potential for Promotion
This role operates at the intersection of the sales team, business leaders, and manufacturing personnel. For this reason, this role can be a high-visibility role with relationships in key elements of the company. If they can prove capable as a collaborator and influencer among the leadership teams, then they will likely be sought after for management roles in either the business or supply chain management.
Large Number of Job Openings
This role is in high demand, as businesses have learned that an effective demand plan is needed to reduce inventory. For this reason, businesses are hiring for this position. As of writing of this article, Indeed.com revealed over 7,000 active job postings for this role in the United States. For those with experience in statistics, this represents a wonderful career opportunity.
How Much Do Demand Planners Earn?
According to Indeed.com, the average annual salary for a demand planner is $71,900. The other major job sites, such as Payscale.com, Glass Door, and LinkedIn, reveal an average salary between $69,500 and $71,300.
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As with most occupations, the salary potential increases with the size and complexity of the role. At the time of this writing, Apple had an open job posting with expected salary of $125,000. Thus, this can be a lucrative career option for those that enjoy data analytics and forecasting.
How to Get Started in This Career
As with most careers in finance, you need a college degree to be considered for this role. Ideally, you would possess a degree in business, economics, or statistics, as all of these provide direct foundational knowledge for a demand planning role. However, even a less relevant degree (think communications, or even psychology) could be applicable.
Regardless of your degree, you really need to exhibit critical thinking skills, and an ability to facilitate productive discussions among different stakeholders. An ideal job applicant is able to position their education as a way to make them uniquely qualified for the role.
The Institute of Business Forecasting & Planning (IBF) is a great resource for learning more about pursuing a career in demand planning. With over 40,000 members, the IBF publishes relevant articles on the topic of forecasting, and facilitates numerous conferences to foster collaboration among the community. A one-year membership costs $250, but I believe the IBF may offer student discounts.
The IBF also offers a career certification (the “Certified Professional Forecaster” or “CPF”). This certification would be a great way to reveal your commitment to prospective employers, and would set you apart from other candidates in the discipline. As of the time of this article, approximately 2,500 professionals achieved the CPF designation. This is relatively modest when compared to the size of the finance profession. Thus, for those interested in this career path, the CPF designation could be an elegant way to distinguish yourself from other job seekers.
Wrapping it Up
In summary, the demand planner is a critical link between the business and the supply chain. He/she is responsible for translating the sales pipeline into a reliable forecast. They use historical trends to validate the forecast, and include input from key business partners prior to finalizing the forecast.
This role is highly analytical, but also requires someone who is able to foster collaboration within the business. For this reason, a successful demand planner is adept at managing large amounts of data, but is also able to develop effective executive summaries to describe the broad themes evident in a product-specific forecast.