Demand planning
Demand planning is a key enabler when you have to make the right decisions in your supply chain for both the medium and long term.
Demand planning serves as starting point for many core processes in Integrated Business Planning such as Supply Planning and Inventory Planning, Financial Planning/Budgeting and Capacity Planning.
Statistical forecasting can help you predict the future based on the past. We suggest that you use a simple and transparent approach, where you separate the different forecast elements such as simple statistical baseline, seasonality, trend and step changes.
If you follow a clear and transparent step-by-step process – without complex algorithms involved – you get a robust and transparent baseline forecast.
The steps in the process are:
You might need more advanced seasonality/step change consideration, but this depends on your maturity level and the needs of your business.
Read more here for a deep-dive discussion about simple forecasting
Changes in the product portfolio and the introduction of new products are significant sources of change and uncertainty – as well as a key demand-shaping technique.
Product families go through these four phases in their lifecycle, and the way to handle them is different in each phase. It’s important to continuously assess what phase your products are in and if they need any strategic changes.
Changes in your product portfolio typically have a significant financial impact. Therefore Finance need to be involved in the product review step.
In the product review step, typical considerations could be:
Sales and Marketing are close to the market and have insights about promotions, campaigns, new products, tenders etc. You need to add this information to your statistical baseline forecast.
You can follow these guidelines to get the input from Sales and Marketing:
Trend and step changes must be entered in a very simple way based on planned future sales and marketing activities.
When you have enriched the baseline forecast with NPIs and sales and marketing input, the participants on the Demand Review Meeting discuss the forecast on an aggregated level.
The forecast will often be discussed on an aggregated level such as product family level for the next 12-24 months maybe even on an aggregated level.
We recommend that the ownership of the Demand Review Meeting is anchored in the commercial organisation, but with participation from all the involved functions in the S&OP/IBP process.
The agenda for the Demand Review Meeting will, in simple terms, consist of the following steps:
The output you get from the decisions and initiatives from the Demand Review Meeting have an impact on both financial predictability, delivery performance, cost, inventory and obsolete stock. You use the forecast as input to business decisions such as adjustment and re-allocation of market spend or sales resources. In addition, you use the forecast to adjust line, manning and machine capabilities as well as to adjust contracts for sourcing of external capacity and materials.