Experienced Demand Planners add value to statistical forecasts by bringing in customer and market knowledge that algorithms alone can’t capture. By monitoring information about their customers in the press and trade journals, they can gain a perspective on potential customer performance issues.

Their knowledge of management changes, potential mergers and acquisitions, merchant changes and financial and operational issues with their customers allows them to advise the S&OP teams about the potential impacts of these factors.

However, in my own experience, one of the greatest sources of customer intelligence exists within my own company and is frequently overlooked.

“Your customer service team can be a secret weapon in managing customer performance and service levels.”

Your customer service team (also sometimes called voice of the customer) can be a secret weapon in managing customer performance and service levels. In my own experience, customer service members were often able to answer customer ordering and performance questions better than anyone else. In some cases these teams also had more consistent contact with customers than their sales counterparts. Their perspective on the business can be very helpful. In my experience, I’ve found five reasons why this is the case, and why you should consider including them in your planning meetings.

1) They Have Their Finger on the Pulse

Experienced customer service members understand the monthly and annual pulse of their business. They know when orders peak each year, what customers have historically ordered large quantities of specific products at unusual times, and when orders begin to drop off each year. Their expertise is especially important in seasonal businesses where orders peak and decline based on weather or cultural events rather than annual holidays.

Their knowledge of the annual ebb and flow of orders can aid the whole S&OP team in planning each month’s expected demand, especially when orders come in that do not match the expected monthly or annual patterns.

2) They See Orders Before Anybody Else

The customer service team sees the incoming orders before anyone else. The are the first to see when orders are larger than normal, and when they are early or late in relation to the normal flow of orders. They are also the first to see when new items are ordered, or when customers orders items that they don’t normally order. They are the first line of demand sensing. Asking them to notify the team when orders are out of the ordinary can help the team adjust their current and future plans accordingly.

3) They Know if Orders are Keeping Pace With the Plan

The customer service team can also advise the team when orders are pacing ahead or behind the planned level for a given period. Knowing when the monthly orders are consuming the forecast faster than planned allows the S&OP team to adjust both the forecast and the planned production to meet the higher demand.

And on the reverse side, knowing when orders are running behind the anticipated pace can help the team allocate product to later periods and allow the production teams some leeway in their production planning. In addition, this team’s advice on allocating limited product and managing shortages can also help improve the overall service level by spreading the available product where it is most needed based on the current open orders.

4) They Identify When Buying Patterns Change

Apart from seasonality, the customer service team can also advise the S&OP team when customer order patterns change significantly. Knowing when a retail customer that normally orders early in the month delays their orders, or when an industrial customer sends in an unusually large orders after wining a new contract, can aid the S&OP team in adjusting production or allocating product to meet the change in demand.

They can also point out unusual orders that need attention to understand if these are one-time orders or part of new pattern. In addition, they can track whether seasonal orders are coming earlier than expected or if they are delayed, allowing the production team critical time to adjust their plans to meet the early demand, or replan to balance production to better match the new trend.

5) Promotions and Events

In addition to assisting with executing planned promotions, the customer service team can also advise when customers execute unplanned promotions or when extreme weather or emergency events drive additional demand. These changes are usually very disruptive, so any advance warning is very helpful. Their early warning of these changes can give the planning and production teams a chance to adjust to the change in demand and balance supplying the unexpected demand along with the normal monthly demand.

Give the Customer Service Team a Stake in the Business

By including your customer service team in your planning, you can give these team members a stake in the business’ success. While this may involve additional work on their part, I have found that the people on these teams appreciate seeing how their work contributes to the company’s success.

“It surprises me how often the customer service team is aware of a customer issue long before the salesperson managing the account is.”

In some cases I have actually asked individuals on these teams to report specific types of transactions to the S&OP team so that the planning teams get the earliest possible warnings about significant changes in order patterns and timing. And in addition to helping manage orders, these team members are frequently also aware of customers that are late in paying, are on credit hold or are in financial distress. It surprises me how often the customer service team is aware of a customer issue long before the salesperson managing the account is aware of the issue. In some cases I have seen the S&OP team ask the customer service team to track and report on the ongoing orders from specific customers when the customer’s ordering becomes erratic.

Remember also that the key customer service metrics – order fulfillment (including OTIF) and service level are also important metrics for your overall supply chain performance.

Based on the fact that the customer service team most often see ordering problems and patterns before anyone else, it makes sense to include them in planning how to best meet your customer’s needs and expectations.

I wrote an article for the Journal of Business Forecasting a few years ago about dangerous habits that lead to software abandonment.  Since then I have reflected on the behaviors I’ve witnessed over my career and considered the stories others have told me about their journeys in change management. From this, I have developed some insights on why many find it hard to attempt digital transformations (or supply chain, planning or any other transformation) and succeed.

Transformations are challenging and are often loaded with what feels like more struggles than wins. When it’s done well, business processes benefit and our teams flourish. Unfortunately, most of us struggle or flat out fail in our transformation initiatives. So, here are some observations on why transformations are so challenging and suggestions on how to improve our chances of success. We will concentrate on new tools or software but the observations apply to most kinds of transformation.

Digital transformation is a series of large changes on a mass scale

First, intentionally doing a digital transformation by design is a change. It is not a minor change; it’s a series of large changes on a mass scale. Most people welcomes changes in others but are less enthusiastic when change is required of themselves.  In fact, they are often resistant to change and complain even about minor changes. My father has been known to say “I hate change” about something as trivial as upgrading his cell phone. Why then do we wonder why digital transformations are so hard, especially when we know so many do not like change?

While not all changes will be met with resistance, many—if not most—will. Just because we see value and in the proposed changes, we can’t assume that everyone else has the same understanding or expectation. One thing I have noticed in transformations that struggle or fail is a lack of properly set expectations and a failure to educate users.

Success Comes When Teams Know What We’re Doing & Why

We should educate users on why we need to change, not just on the mechanics of the change. Project education isn’t just a line item or a project statement. Rather than being a separate component, education should be a routine part that starts at the beginning of the project. Success comes when our teams understand what we are doing, why we are doing it and, most importantly, how it will benefit them.

This kind of education isn’t communicated within a formal classroom structure, but in the everyday conversations you have with users of the final solution. If your conversations during the transformation are limited to a core group of ‘superusers’ that excludes all end users, you may already be set up to fail.

Assign a Change Champion

A common theme of failed transformation projects is the lack of a change agent or a change champion. The change champion should not be a consultant or leader from another team or from a separate part of the organization. While it’s important to have the right implementation partner, they are not the change champions either.

Instead, change champions are team members who facilitate the transformation. They should be respected individuals from among the users who will embrace the change, share excitement for the new software and be able to demonstrate the new solution. Change champions listen to users and communicate requirements or bridge the gaps for the team. They should have the ability to convince other employees to use the new tools.

Change champions listen to users and communicate requirements for the team

It’s very difficult to have a successful transformation journey without a change agent or change champion. If you’re struggling with launching a transformation project, you may be missing this critical team member.

One organization I worked with had attempted to implement new planning software on three or four different occasions but ultimately failed at various points in the journey. They had a lead for the project and yet struggled. It wasn’t that this person wasn’t influential or a good leader, however, in this case, there was one Planner with equal clout that was incredibly resistant to any software change and prevented the launch of the new tool.

On the next attempt to implement advanced planning software, we knew we had to do some things differently to succeed. We added a new change champion, expanded the project strategy to include a business intelligence solution, and included process change to supplement the planning software. While the same user put up a roadblock and refused to use the new tool, we were still able to successfully launch by creating a strategy that supported the business and allowed the organization to launch the tool while working around the resistant user.

Build Process Maps

Another cause of transformation failure is the lack of understanding of the current state compared to the desired future state. Especially in an implementation that involves new software, part of the change involves moving to a new tool with enhanced capabilities.

When we fail to understand the differences between our current process flow and our to-be process flow, it is incredibly difficult to create a transformation roadmap that will lead to the desired to-be state. One of the most basic elements is to have process maps defined for both the current state and the desired future state.

A basic element is a process map for the desired future state

Process maps provide clear visibility into what must be implemented immediately and what can wait for a future enhancement. Digital transformation success is dependent on having a clearly defined future state process. Without it, the tool isn’t likely to be configured to support the desired future state. The journey may be made of one giant leap or many mid-size changes and mini launches.

Don’t Allow New Tools To Be Used For Old Ways of Working

Finally, I think most of us understand the importance of not using the design of the current tool for the new tool. However, the reality is that many teams fall into this trap. This is probably my biggest pet peeve when joining new teams who are at the end of a digital transformation or have just completed one.

This always creates issues, including some that will felt for many years to come. In such cases, the new tool is being forced to behave in ways it wasn’t designed to work. This results in a tool that is clumsy, slow and ultimately doesn’t support the desired to-be process or future growth. Despite good intentions, this can really derail long-term business success.

Encourage users to describe the behaviors they want to see

Often this comes about as users want to be sure to get their favorite functionality in the new tool so it works just like the tool they currently use. Be wary of having to implement functionality just because it exists a certain way in the current tool.

Instead, encourage users to describe the behaviors they want to see and how they’d like to view those results. Then, compare that need to how the new tool is designed to work and implement accordingly.  In my opinion, combining this strategy with process maps improves chances for a successful transformation.

In Summary

I haven’t yet found the key to secrets to make transformation projects easy or guarantee success. However, I have observed some common themes in transformations that struggle or fail outright. The biggest opportunity common to all of them was the need for a change champion with a clear vision of the destination and who can generate excitement for the project.

Having a change champion doesn’t lessen the importance of educating users—ideally, the change champion also leads user education. Change champions are also the experts that need to understand and be able to communicate process maps for the current state and to-be states. The best change champions also make a conscious effort to avoid imposing old tool designs and processes onto new tools, identify strategies to transition between current and future states, and become the enabler for change.  Failing at any or all of these can result in user resistance, inefficient workflows, hindered growth and even stalled or failed projects.

This article first appeared in the summer 2024 issue of the Journal of Business Forecasting. To get the Journal delivered to your door every quarter, become an IBF member. Member benefits include discounted entry to all IBF training events and conferences, access to the entire IBF knowledge library, and exclusive members workshops. 

In many companies there often appears to be a difficult relationship between the sales and demand planning teams when it comes to the plan numbers. While some tension between these teams is inevitable, it seems to me that perhaps we are viewing this relationship incorrectly.

Based on my several decades of experience dealing with salespeople, I think many people – including Demand Planners and Managers – do not really understand that salespeople are not the enemy when it comes to planning.

They can, in fact, be your best ally. If you understand how the salespeople tend to think and operate, and the environment they operate in.

Every Salesperson’s Goal is to Make Plan

Salespeople are hired to sell a certain volume of product at a specified margin percent each year. If they meet the plan numbers for a year, they get another chance to do the same for another year. If they fail to meet the plan for a year, they are then under more pressure to make the numbers the following year.

Most plans increase incrementally each year, so every year the salesperson must be more creative, more focused and motivated to make the new numbers. Effective salespeople are always hunting for new opportunities to help them make plan.

Salespeople as Sharks

If we think of salespeople as sharks, we can get some insights into why they might seem like an enemy in planning. Sharks are hunters, apex predators with few enemies.

To be successful as a salesperson, a you must think and sometimes act like a shark.

To be successful as a salesperson, a you must think and sometimes act like a shark. Swimming slowly through the sea of sales opportunities, constantly searching for the next sale, exploring new areas, and acting quickly when an opportunity appears. Their only real competition is other sharks, that is, competing salespeople.

You Cannot Tame Sharks, But You Can Learn to Feed Them

I often see Demand Planners and salespeople arguing over the details of plan numbers, and in most cases, this is both useful and inevitable. However, this should not be viewed as something negative. We want plan numbers that are the result of honest deliberation. Where this process can derail is when each side sees the other as an opponent when, in fact, they both want the same goal – sales growth. So learn to feed the sharks.

Learn to feed the sharks.

Share every piece of relevant information you can with them. And do not limit yourself only to data available within the company. POS and inventory data are nice to have, and in fact necessary to guide a business. But include news about the companies that the salespeople are serving, and that they may not have time to review on their own.

Significant changes in location counts, staffing, programs of competing suppliers (including promotions), management changes and company performance are all useful pieces of tactical information that can help a salesperson judge when and how to approach a customer with a sales opportunity.

Ask to See the Math

While what I have said so far might seem like I think Demand Planners should always follow the sales team’s direction, there is one fact that Demand Planners need to ask when a salesperson proposes a new plan.

Show me the math.

Show me the data that you used to get to the numbers you want to use. Do not make me use your numbers just because they “feel” right, or because you need these specific numbers to make your plan.

Keep it real. After all, the Demand Planner’s key job is to make sure that what is planned actually gets sold. A demand plan is a request for product. A sales plan is a map to meet the sales goal. Both need to be based on realistic math that shows a clear path to the goal.

Above All, Build Solid Relationships with Salespeople

Effective sales are based on good relationships. We tend to buy mostly from people we know and trust. Effective planning is equally dependent on solid relationships. This means we can disagree with each other without becoming disagreeable.

We can disagree with each other without becoming disagreeable.

We can playfully challenge each other and play hardball when we see the other side gaming the numbers or hiding information. And never try to prove that the other side is “wrong”, as this can permanently damage the relationship and prevent future sharing of information.

Let the Sales Team Be Your Teachers

Good salespeople are in regular close contact with their customers. They know what drives their customers and what they need. If you are a Demand Planner, learn to regularly ask them about their customers and their business. They often know things about their customers that can help you with your planning.

Are their customers over inventory against their plan or open-to-buy? Are there buyer changes coming? Is the company in merger talks or under financial stress? Are they planning to repeat last year’s holiday promotions again this year? This kind of information can lead to especially useful discussions about how to plan future business.

Sales is a Game, and You Both Need to Win – But Not at Each Other’s Expense

Collaboration is often more difficult than merely playing to win. It requires more effort. However, in the long run, it produces more wins for more people, and helps support ongoing relationships.

So get to know the sharks that make your company successful. Feed them what they want and help them find the opportunities that will make you both successful.

A while back I had the chance to switch from a demand planning role reporting to Sales, to a demand planning role reporting to Operations. I didn’t know it at the time, but that question has been debated for a long time in our field: where should a company’s demand planning and forecasts be done? Should it be a commercial function or an Operations function? Since I have worked on both sides of the equation, I’ll delve into the pros and cons of each and add my two cents to this discussion.

Option 1: Demand Planning Being a Part of Sales

I have to say that when I worked in Sales and reported to them, it was much easier to find out what buyers did and when they were doing it.  When demand planning and forecasting are done by the commercial side, customer wants and preferences can be better understood. Sales teams have first-hand knowledge of market trends, how customers act, and other details that can have a big impact on making accurate predictions. I found this easier to predict what demand will be, which will in turn make customers happier in the long run.

Also, when I worked more closely with Sales, I was able to get information faster and talk to customers in their own language. Because I was close to the market, I could get a better idea of what customers really wanted at that moment, respond quickly to changes in the market, and change my forecasts to match.

On the other hand, a lot of what I did was aggregate up demand that was often unchecked and not without bias. Also, my forecasts were only good for a few weeks, and salespeople usually focused on short-term goals and targets, which can sometimes overshadow the need for long-term planning. Pressure to meet short term sales goals would cause sales people to overestimate demand, which would lead to too much inventory or not enough.

One last thing I’d like to say is that when I was in Sales, my company moved me to Operations partially because there were silos and no link to the supply side.  I found that the commercial side may not fully understand how the supply chain works and what its limits are. Demand Planners may miss important information about production capacity, lead times, and inventory management if they don’t have a strong link to the operational side. This gap can lead to extra inventory, stock-outs, and higher expediting costs, as we saw for ourselves.

Option 2: Being a Part of Operations and the Supply Side

While I could better communicate with customers when I worked in Sales, I could better communicate with the business when I worked in Operations. By combining demand planning with operations and supply, Demand Planners get a full picture of the whole supply chain. They can make sure that the right number of resources are used by matching forecasts with output capabilities, inventory levels, and logistical constraints. By having me work in operations, we were able to reduce inventory, cut down on stockouts, and improve the general efficiency of operations.

Full disclosure: We didn’t make inventory and cost improvements simply by giving me a new boss under Supply Chain. We also made a collaborative workplace. A bigger benefit of moving from Sales to Operations was that, with company backing and my independent mindset, we were able to break down silos and work together across departments. Putting demand planning in Operations helped different teams work together like Sales, Procurement, Production, and Logistics. By breaking down silos and dealing with people from different departments, I was able to make sure that my forecasts matched what was going on in the business. This gave me a more synchronized way to meet customer needs.

I now also have an organized monthly demand review with Sales, which didn’t exist before. However, I’ve lost some of the customer insights I had because I was so close to customer in my old job. There may be a delay in getting information, and I have lost some of the insights I used to get. This lack of information about customers can make it harder to make correct predictions. This is something we did notice at first (at the beginning my move actually made my forecast error a little worse) but this was made up for by better inventory management and a more efficient supply side.

The key learnings here for me were to make more of an effort for close collaboration with the commercial side and a structured process such as S&OP becomes essential.

Option 3: It Doesn’t Really Matter

Working on both sides and moving around taught me that it really doesn’t matter. There are good reasons for both choices, but the best place for demand planning and forecasting in a company relies on many things, such as the industry, the structure of the organization, and the strategic goals. I think the key is how the person doing it thinks about it and how all the functions work together.

In the end, the priority is to encourage collaboration between different parts of the business and make sure that Demand Planners have access to useful data and insights from both sides. This can help make planning and predicting for demand more synchronized and flexible, which is good for the business as a whole.

Collaborative planning, forecasting and replenishment (CPFR) emerged from a relationship between Walmart and a major supplier, P&G, to better plan their Listerine mouthwash product. The steps were 1) information sharing, 2) joint demand forecasting, and 3) coordinated shipments.

It was a straightforward process with a very clear value-add but in the 1990s, as Lean methodology took hold, CPFR was ‘streamlined’ into more of pure order management process, and lost some of its essence. But the principles of CPFR are still golden and can be applied to great effect today. The transparency and collaboration it engenders with your supply chain partners can really take your planning to the next level, improving KPIs on both sides.

Internal Vs External Mindset

This ‘outside in’ type of planning where planning teams incorporate information from their customers and suppliers is the next evolution of not only demand planning, but supply chain management as well. Collaborative planning between companies is about sharing information (enabled with technology), and building relationships and trust to share information that benefits both parties’ ability to forecast and plan. In a nutshell, the goal is efficient and effective operations by enabling joint business processes across enterprise boundaries.

It takes from that inside-out thinking that most organizations are stuck in, to an outside-in thinking mindset. With inside-out thinking your view of demand and supply is based on information gleaned only from within your own four walls. We’re making decisions based on our own internal information and make a best estimate of what we think our customers will buy. There are of course a lot of demand drivers out there that are not necessarily captured in a demand forecast using historical data. Even with advanced modelling, it is driving looking in the rear view mirror.

Outside-in thinking incorporates information from the customer and the customer’s customer, the end-user. It allows us to know what they are looking for and why. Your retail partners have information about demand that you won’t get unless they tell you. Types of demand drivers include what you customers are doing in terms of pricing and promotions and other demand variables. By talking to them in a structured, cross-enterprise process like CPFR, we can get this information and update our forecasts accordingly, and subsequently manage our supply responses more efficiently.

Knowing what happening outside allows us to plan better inside. That’s what is so valuable about CPFR – visibility into demand drivers that you wouldn’t have otherwise.

Guiding Principles of CPFR

Collaboration, consensus, transparency. These are what enable the joint signal of “this is what we think is going to happen”. It means we can better serve our customer and their end users, while optimizing our supply responses. And guess what, this works with your suppliers as well. Joint collaboration with them, sharing forecasts, is valuable too. This transparency upstream allows your suppliers to plan better, which means more likelihood of getting what you need when you need it. Both sides benefit. It’s not trying to get one up on them or holding information back because you’re afraid they’re going to use it against you. Rather, the more transparency you have, the better the working relationship you’re going to end up with.

Benefits For You

• Reduce your forecast error
• Plan and manage uncertainty better
• Reduce your costs and optimize inventory
• Service customers better
• Fewer stockouts

Benefits For Your Customer

• Plan promotions better by knowing they have enough inventory
• Better commit to their end-users
• Reduce error
• Save money, do things more efficiently
• More robust supply plans

Committing to a Synergistic Relationship

You must truly believe there is value for your customer. That’s the reason why you want to share. It’s not a one-sided relationship. You both must see value in this process. Mutual benefit is the reason you’re doing the process.

However, I understand there’s a cultural mindset sometimes with executives whereby they’re scared to share information. Some people are scared that if they share information, they’re going to use it against us. And I get that. We need to start small, build a pilot, and work from there. Start with what you’re comfortable sharing and start building a relationship. It will take time to build the necessary confidence and trust on both sides because honestly that culture is you don’t trust the other company you’re not going to feel confident sharing your information and you won’t get the information you need. In essence, you’re dating – you’re getting to know each other, trying to establish long-term relationship. You can’t call someone up you’ve never met and expect them to tell you everything about them – you’ll scare them off.

An Example Of How CPFR Worked for Me 

There was one company I worked with, we were building a collaborative relationship and the first they were represented of a good chunk of our business and we wanted to work with them so we actually went to their team and spent the day with them, learned how they do some metrics and found out the way they measure our service on time was different than the way we measured. Their perception of how we were delivering was different than our perception – that was just thing we found out by talking that day. We also found some challenges they had. We found out that they were committing to their customers based on when we were going to ship into them and that what we were doing was impacting their customers and how they were trying to do workarounds for that. We understood their planning a little bit better talking with them.

After that we said hey, why don’t you give us some POS data and some of your customer information sales information? That way we’re going to be able to improve your service. They started providing some sales data and their service did improve. They were a little bit vulnerable with us, we were a little bit vulnerable with them and both of us came through and helped each other.

We were then able to build on that relationship – we asked for their inventory position because if we knew their inventory position we can improve their service a little bit more. We found out they were ordering once a week. We had a truck doing deliveries by their locations twice times a week, and could easily move them to that route for a second delivery. We suggested that if they order twice a week we could meet their demand a bit better, getting closer to actual demand. In so doing we optimized our transportation and they lowered their inventory – the only thing they had to do was order twice a week instead of once a week. It was a win-win situation.

Within 18 months we were jointly launching a new product together. They had exclusivity for the first six months giving them a competitive advantage in the market while allowing us to plan demand effectively. It was the most successful launch in both organizations’ history, all because of the collaborative relationship. To get to that point took well over a year and both sides had to commit to the journey but it was well worth it.

This won’t be possible with all partners. One of the keys to success is choosing the right strategic partner, and it may not be the biggest. Rather it’s the one who shares your view of the core principles of transparency and collaboration.

Businesses run in an environment of change and evolution that has multiple dimensions – Economic, Sociological, Political, Competitive, Regulatory, and Technological. At the very heart of the drive for business success is the customer/consumer demand for the company’s products. Indeed, a company’s revenue is a mirror reflection of said demand and all factors that affect it. Understanding consumer behavior, therefore, is of paramount importance.

Demand for a company’s products and services ebb and flow with a complex mix of seasonal, cyclical, and life cycle effects. As Forecasters and Demand Planners, how do we best structure our forecasting and planning efforts in this fluid and often volatile environment?

1. Gather Information From Market Facing Colleagues

This is to discuss ideas with those who are interacting both directly and indirectly with customers and consumers. We want to explore their experience and thinking regarding why and how purchase decisions are made, and what they think the most important considerations are in the purchase decision process. Marketing, Sales, and Product Management professionals can be especially helpful in their perspectives.

The primary purpose of this is to not only evaluate key factors that may help us to forecast, but to explain the variation in patterns of demand that have been historically experienced. Analytics methods – both qualitative and quantitative – are valuable tools that help characterize and explain purchase behaviors of both customers and consumers.

2. Review Qualitative Inputs

Review the findings from our discussion with our colleagues in Marketing, Sales, and Product Management. This can be a collaborative forum or meeting/s that happen ahead of the formal S&OP process. Organize their insight about sources of demand variation and gain consensus from the various stakeholders. This is a forum for feedback and exploration that can refine the conclusions, challenge our hypotheses, and prevent misconceptions about customer and consumer behaviors.

3. Create Scenario Models 

Once we have an understanding of the different demand drivers, we can generate scenario models that incorporate said demand variables. Scenario models help us understand how demand for our products will look in different situations that may arise in future.

For example, we could generate models with unique assumptions regarding periods of economic growth, economic recession, business cycle stages, product lifecycle stages, demographic shifts, population rates of change, product pricing, supply chain issues, business sector consolidation, and more.

Pick the assumptions that are relevant to your business and you’ll have an understanding of what could happen in different scenarios. Adaptation to rapidly changing conditions means that we should not think of purchase behavior from a steady-state or static perspective. We need to have a portfolio of explanatory and forecast models that we can access to quickly pivot and adapt.

Conclusion

It is important that we understand our customers and consumers. We should understand their motivations, needs, purchase decision process, and probable response to changing conditions affecting them. We should create scenarios of behavior under a variety of alternative assumptions.

We should be observant. We should be ready. We should be prepared. The above approach improves the performance of demand forecasts, supporting the company in its efforts to increase operational and financial performance.

S&OP processes always include a demand review step. There are plenty of articles, webinars, and blogs about how to set up and optimize a Demand Review, covering such topics as the best metrics to use, which departments to include, and whether to use a unconstrained or constrained demand forecast.

These details are important, but there is something often overlooked in our attempts to build a robust Demand Review. We often struggle to speak a “language” that is understood by those outside Demand Planning.  By failing to speak a universal language we our peers can undervalue our efforts and fail to see how what we do  relates to their work.  As a result, we struggle to keep Sales and Marketing partners engaged and, subsequently, we don’t get the necessary insights.

Details are important, but the priority for our Demand Review meetings is cover four key areas. Let’s look at the cornerstones of a healthy Demand Reviews and identify what value should be captured from each of them, including the one even experienced Demand Planners miss that is key to tying our demand plans to revenue.

1 – Understand The Assumptions Behind Past Performance

To start, we need to understand the value of our past assumptions. These assumptions include understanding our demand history, quality of the data, the models we use to create statistical forecasts, and the adjustments we made to accommodate business changes. We can’t possibly build trust in the forecast we are using if we don’t take the time to measure and track past performance. It’s why we have so many discussions around which metric is best, which level to measure, and how to apply formulas.

“Too much time is spent reporting performance as if this is the purpose of the meeting”

Understanding past performance is necessary, but frequently too much time is spent reporting performance as if this is the purpose of the meeting. Capture it, measure it, discuss it but don’t spend all your time on it. It is equally important to take the time to choose the right metrics. While a single metric can certainly tell you something valuable about the forecast, a singular metric limits understanding and often generates misconceptions about the forecast. Using multiple (compatible) metrics improves daily decisions when using the forecast.

This article isn’t to debate which measure is best, which formula to use or how to apply them; it’s a reminder to consider metrics beyond just looking at accuracy and bias. There are plenty of great metrics that you should add like FVA, Forecastability, tracking signals and waterfalls, forecast hit/miss, and even simple absolute error in dollars. Whatever combination you choose, explain the metric in terms of what they measure and what they tell you about the data. Advanced planners will take the time to link results to actionable behaviors in other areas.

“Discuss past assumptions and which ones were most value-added”

For example, forecast performance can explain poor service levels, tendency to build excess inventory (bias), or even why operational efficiency is low (poor product mix measured by accuracy calculated at lower levels). Measurements like FVA can tell us which assumptions, forecast or whatever we want to measure provided a better predictor of actual demand. Discuss past assumptions and which ones were most value-added.

2 – Assess The Current Demand Factors

Secondly, we need to understand our current demand situation. The Demand Review should also highlight our current immediate forecast and help us to understand how we are trending in actual performance. While this isn’t the ultimate focus of our meeting, it is something we should discuss. Are we waiting on orders or are orders ahead of plan? Is there a risk of creating future shortages?

Reviewing and discussing the current short term demand picture can also help us identify unplanned and previously uncommunicated events. Finding these events while they are happening — while less than ideal — can help us mitigate risks and drive better customer service in the future than if we were to find them when reviewing our past assumption performance.

Of course, it would be better to be told of these events in advance so they can be properly planned, but let’s face it — for every event or planned promotion there is at least as many and usually more that happen on the fly without any advance notification.

3 – Understand Future Demand Factors

Our Demand Review should help us understand the future. Most of our time should be spent on understanding the assumptions, events, new products, or sunsetting items loaded into the demand plan in the mid to long range period, as well as any risks or opportunities in that plan. Rather than thinking about the forecast for next week, next month or maybe two months out, we should be looking out to the next quarter or the next year in our forecasts. At a minimum, we should be looking at our max lead-time plus one period.

“The Demand Review creates a road map that all other departments in the organization will use to make decisions”

I’ve been in many Demand Reviews and have been guilty of leading reviews where most of our time was spent on looking at past performance. Sure, it helps us to understand something about our process, we must give at least equal attention to the future. The whole reason we’re building the demand plan is to have some understanding of what we can expect in the future and to share that knowledge with the rest of the organization. It’s to set a road map that all other departments in the organization will use to make decisions.

Understanding the assumptions and any risks or opportunities that exist provides context, credibility and builds trust in the forecast, which is critical if other functions are to use it. Thus, when using the demand plan, we can plan contingency strategies for things not in the plan instead of letting fate happen.

4 – Understand The Gap Between The Demand Plan & Financial Plans 

One last part often missing from demand reviews is a gap analysis between the demand plan and the operating budgets or financial plans. We work as a team towards a single plan, but those forecasts may look different depending on how they are translated such as the difference between the demand plan, financial plans, and the replenishment plan. As the demand plan rolls through the S&OP process into the supply review, disconnects between what we sell and what we can supply are identified and addressed. Unfortunately, we often overlook the need to compare the demand plan to the latest operating budget or financial plan.

It’s not just about comparing to the original plan from the beginning of the year — that will no doubt change — but instead understanding the gaps between the current financial plan and the demand plan. Are we planning for revenue above what’s in the demand plan? If so, what is being done to ensure the right product (or any product) will be available to sell to meet the revenue expectations? If revenue expectations are below the demand plan, do we understand why, and the potential excess inventory we are building? Communicating and understanding gaps improves opportunities to meet corporate initiatives.

Demand review are a critical step in any S&OP process.  As Demand Planners, we often get buried in a lot of details with large charts and files, talking about metrics that many of our sales and marketing partners may not understand or find valuable. Taking the time to communicate the right metrics and refocus efforts on the parts that matter most will result in a more productive demand review meeting.  It’s not about who is the most accurate, but rather identifying the data that provides the most value and capturing the insights needed to better run our business.

 It is important for both supply chain and financial professionals to consider the impact of mitigation and risk management efforts on company financial performance. Projected demand for upcoming periods must be planned for, and we look to balance supply and demand using demand forecasts and collaborative planning forums like S&OP or IBP.

In S&OP/IBP, business considerations and issues will be brought to the table that represent risks to the organization from operational and financial perspective. Strategies and mitigating actions are essential and should be chosen considering the expected financial consequences for the company.

The finance function is a key stakeholder in such forums as they supply information and financial analytics that can be used to ensure that all operations can be financed effectively and that decisions made contribute to a competitive ROI for the business. They are an essential part of the team in estimating and evaluating the alternative risk management alternatives available for risk mitigation strategy actions. Finance and supply chain functions have a shared responsibility for supporting the S&P/IBF processes.

Variation in demand as well as supply chain considerations can contribute to the need for safety stock, for example. It may require higher inventory and more points of distribution for the achievement of the desired level of customer service. It may require supply chain adjustments and mitigation that effect the business economics and business risks. Mitigations most often have financial effects – positive and negative – on the company. This kind of risk mitigation can be expensive.

Demand and sales forecasts are the platforms from which supply planning is launched. We are basing the supply chain structure, plans, and operations on these demand forecasts that then affect revenue and operating profit. Supply chains have a myriad individual supply links that interact with other links in the chain and with other supply chains. There are a host of supply chain risks to be hedged, mitigated, managed, and financially evaluated.

There are risks related to:

Disruptions: Supplier bankruptcies, natural disasters, and labor disputes.

Delays: Inflexible supply sources, capacity utilization, border crossings, customs.

Information Systems: System integration issues, networking problems.

Procurement: Exchange rates, single source materials, components, finished products for resale.

Inventory: Demand and supply volatility and uncertainty, excess and obsolete inventory, inventory holding costs.

Capacity:  Cost of capacity, cost of flexibility, capacity utilization rates, production flows and set-up, operational and financial condition of supply chain partners.

Lead Times and Related Volatility: Transportation, production, assembly, shipping components, supplies, raw materials, work in progress, finished products.

Demand Forecast Error: Excessive promotional activity, innately high volatility of demand, poor handling of data and information, poorly organized and poorly managed forecasting process, excessive forecast overrides and bias, lack of collaboration, key function participation

There are supply chain management mitigation approaches widely used for demand and supply related risks:

1. Increased capacity engagement through redundant suppliers
2. Increased oversight and responsiveness
3. Increased inventory and working capital
4. Increased company and supply flexibility
5. Aggregated demand to reduce uncertainty & forecast error

The mitigation approaches may result in increased product costs, operational costs, transportation costs, distribution costs, warehousing costs, and other supply chain management expense areas. Without the beneficial effects of higher revenue through volume and pricing, the mitigation approaches in isolation will probably have an adverse P&L effect.

They may reduce Net Operating Income, Net Income, and Cash Flow from Operations. So, it is important with support from the financial function to estimate financial effects and plan for actions that aid in improving other areas of the P&L – topline and/or expense – to achieve financial balance.

Impact On The Balance Sheet

Where the mitigations require investment in working capital and long-term capital assets, the balance sheet effects come to the fore. The investments will generally reduce cash, increase inventory, increase fixed assets, increase debt and the associated interest expense.

The Return on Assets and the Return on Equity are both impaired due to the reduced Net Income experienced by the company. The Return on Assets is further impaired by the combination of lower Net Income and higher Total Assets. So, again it is important to find other areas of the P&L and of the Balance Sheet with the support of the financial function where improvements can be made to balance the effects of the mitigation approaches on these key return metrics for the company.

Risk Mitigation Requires Collaboration

Throughout our demand planning and supply chain management efforts, we are dealing with volatility and other sources of risk to the business. The challenge is to be able to mitigate and hedge risks while producing a return on investment for the company.

This requires sharing of information and ideas, collaboration, and cooperation, as well as systematic analysis of costs and benefits expected from the mitigation actions that may be taken. It also requires both a short-term and a long-term perspective in our decision-making processes. The S&OP and the IBP processes are forums within which to do this.

We must consider the financial effects of our demand management and supply chain management activities on the operational and financial success of the company. We cannot do this in isolation. It is important to develop a relationship of collaboration with the finance function of the company to take part in our forecasting and planning processes, providing financial information, analytics, and financial counsel. This can help to realize an effective working relationship that balances the considerations of supply chain efficiency and operations, as well as financial ramifications and competitive financial performance for the company.

For further information on how Finance can benefit from collaboration with demand planning, click here.

To build a collaborative forecast, you need more than just Marketing, Finance and Supply Chain; you must have Sales involved in the process. They add customer level insights, market intelligence, and real time information that is often not available from anyone else.

Making and keeping a connection with your Sales partners is not easy, but it will pay dividends if you are willing to put in the effort. Here are a few key practices I have used successfully to build a good two-way relationship with Sales that has not only benefited forecast accuracy, but helped Sales drive revenue.

Don’t Assume Everyone Thinks Like You

Never assume Sales is operating with the same “one number” philosophy that Supply Chain uses. Make sure to ask if there are customers being targeted for growth or that are being allowed to decline. You might be surprised to find variances that will provide you with valuable insights that algorithms simply cannot identify.

Do not assume that every person you engage with in your forecast discussions will interact with you the same way, and process data the way you do. Learn Sales vernacular—do they use dollars or units, what calendar period do they compare to, and how do they aggregate their data? Be prepared to modify some of your data to make it user friendly for your audience.

It is important to understand that you will encounter colleagues in Sales who embrace the approach, soak up data, and ask for more. You may have others that are not as enthusiastic to engage and need more time to get up to speed. As you both learn how to work better together, always be clear as to what it is you are looking for from your relationship with them. Do not assume they know what a Demand Planner needs to do their job properly, and vice versa.

It is always good to remind those you work with what the demand forecast is used for in your organization, and how valuable the work done to improve forecasts is to company performance in terms of inventory savings, increased revenue, and customer satisfaction.

Work Hard To Be One Of The Team

Often the personalities of Sales are more extroverted compared to those in Supply Chain—do not let this intimidate you. Show your interest in learning what challenges they face, how they are measured and—equally as important —get an insider’s perspective on your customers. Start by asking to attend sales meetings, customer reviews, planning sessions, and whatever is relevant to your role and available in your company.

As your presence becomes more familiar, and you begin to understand the Sales culture, you can learn what important goals they are working towards, how they are incentivized and, most importantly, they will become comfortable with sharing important insights and keeping you connected. As you build a reputation for being passionate about helping drive the business, you create partnership opportunities. As you build this rapport and establish trust, you can ask harder and more challenging questions, and ask for feedback to make things easier.

In a strong two-way relationship, you need to ensure you are giving at least as much as you are getting. As you build your connections over time, you will begin to get more invites to important meetings, receive more relevant emails, and communications will be less challenging.

Trust, Trust, Trust

Now that you are building your connections, you need to ensure you maintain trust. Many people avoid the forecasting process because it is one where you are often wrong. Make sure you give lots of credit to your colleague/s in Sales when you get information that leads to a better forecast.

You also need to show appreciation for the effort in getting information that may not be valuable as well. Customers are not always forthcoming with their numbers but having a Salesperson that is willing to make the effort and engage with a customer to get information is extremely valuable. As you develop a good flow of customer information, you can utilize and learn to refine the data over time.

Remind Salespeople frequently why good forecasts are important. If your motivation is about better customer service and improving profitability, you will get more support than if your only motivation is to improve your own MAPE.

Think Like A Salesperson

Sometimes you need to act like you are in Sales to communicate with Sales. Anyone who has worked in Sales knows you need to be persistent to get a customer’s business. You may have to be persistent to get their responses and to hold their interest. Do not give up when you don’t get fast responses to your questions. Instead, keep asking how you can help them serve our customers better. Remember, persistence pays off.

As you review data, you can also think like salespeople. For example, I noticed that one of our customer’s volumes had declined over the years on a group of items. Since the Salesperson in charge of this account was new, this information provided him a previously unknown opportunity to pursue. Often customers are moved between members of the Sales team, and information is not always transferred effectively.

Do not assume that important pieces of information like this are already known. By providing helpful insights to new hires, you will build better relationships.

When reviewing future sales projections, most salespeople tend to be optimists. To help reduce this spin, I often ask them to project as if they were wagering their own money on the outcome. Phrasing the question to include a pretend bet on the outcome, using money out of their own pocket, may change their frame of mind to be more realistic.

Sell them on ideas like participating in annual sales planning meetings, getting you access to customer portals, including you in customer calls, and even connecting you to individuals at the customer who are directly involved in the purchasing process. If you can take some of the burden off Sales and get information directly, you both win.

When hiring Demand Planners, consider those with successful experiences in selling or working with Sales as they can bring valuable skills to your team. Sometimes it helps to think small if you have just begun to work with the Sales team. Start by building a strong relationship with just one member of the Sales team, and that can become a springboard to expanding your reach. Showing others the work you have done with another member of their team is an effective way to expand your network with the Sales team.

Keep Score & Take Advantage Of Salespeoples’ Competitive Nature

You need to introduce forecast metrics into the conversation at some point, but keep it simple, especially in the beginning. Forget about MAPE, WMAPE, MAD and other metrics that are difficult to understand and not directly relevant to salespeople. For example, try forecast bias percentage (forecast/shipments-1).

This measure is an easy way to show trends in forecast performance that need attention. If you are showing your sales partner that we have over forecasted their customer by 25% the last 4 months, this is a good starting point to take action, and does not require a background in statistics.

Connect metrics directly to each salesperson through their customer and establish forecasting metric targets that are adjusted to the variability of the customer. The most challenging customers should have lower forecast accuracy targets, and vice versa. Your goal is to create a level playing field to stoke competitiveness among your selling professionals. At virtual meetings with the entire sales team present, I have had a lot of fun presenting a Forecaster of the Month award, complete with certificate and photo. Make sure they understand how the metric works, how they can provide additional insights to potentially override the current model, and let the games begin!

Keep It Simple

Everyone’s time is valuable. As I mentioned above, keep metrics easy to understand, and keep the data you share simple, and in a format where it is easy to see the key points. During your forecast discussions or exchanges with your Sales partner, don’t ask for analysis, instead ask for answers. Lay out the situation, then provide specific options or directions to take.

My questions look more like multiple choice rather than ‘fill in the blanks’. I have found this approach to return clear and actionable responses. If you are not getting actionable responses, you may need to better frame how you are asking the question.

Ultimately, where Sales can lend the most value in planning is to explain or — better yet, alert to — outliers. Statistical models do fine when demand is steady while qualitative customer information is very valuable is when there is a change in course. Did a customer gain new volume and, if so, approximately how much and when will it begin? Has there been a shut down due to the pandemic, did they delay a new product launch, or even go out of business?

Since you are now like a member of their team, and better understand their business, you can ask simple, clear and relevant questions and get valuable insight that explains outliers and improves your forecasts.

Win Over Their Leader

As with any large and important change initiative, you need to get their leader’s support early. You may have to work hard to convince them to adopt a forecast KPI to their metrics—to facilitate this, share the dollar value of improving forecast accuracy, i.e., what savings are gained for every one percent improvement in under- or over-forecasting.

If you have not done this exercise, IBF has easy-to-use calculators that can help. Connecting dollars to forecasting improvement will help you get your Sales Leader interested. Remember, how their leader interacts with the demand planning team will set the tone for how the Sales team as a whole interacts with you.

Remember that effective relationships are built over time, not overnight. This is especially true if Sales and Demand Planning have not had a strong connection in the past. By applying the tips above, being an engaged partner, and being willing to lend a hand when needed, you will gain insights into your customers’ behavior and intelligence that will lead to better qualitative forecast inputs.

This article originally appeared in the Spring 2021 issue of The Journal of Business Forecasting. Become an IBF member and get the Journal delivered to your door quarterly, plus discounted entry to IBF conferences and events, members only tutorials and workshops, access to the entire IBF knowledge library and more. Get your membership. 

As demand planners/supply chain planners, we now have a range of advanced supply chain planning solutions available to us. The options are wide-ranging, but one thing is becoming increasingly clear – the value of demand planning/S&OP in the Cloud. Here I share my implementation journey at De La Rue, the world’s largest printer of banknotes, and listed on the London Stock Exchange.

New Tools Mean New Opportunities For Connected Supply Chains

Anaplan has made big strides with their UI and core engine with a renewed focus on supply chain; SAP is solidifying their position in the S&OP space with their IBP solution capitalising on their immense footprint and legacy solutions, connecting with their existing, more traditional core ERP; and Microsoft Dynamics seems to grow exponentially in both connectivity and functionality with seamless integration across business areas starting with CRM.

Even Tableau, at its core a data visualization tool (and a very good one at that) is adding more and more functionality to their inbuilt logical functions suite to run more complicated computations. In short, we have a lot of sophisticated solutions to choose from.

Throw in some SQL skills (which is increasingly common for a supply chain analyst) and you can have a custom, self-service solution built in no time!

S&OP In The Cloud Is The Future Now

I was recently involved in designing and developing custom supply planning solutions using Cloud software. As a supply chain professional, I can’t stress enough the importance of tools that facilitate a medium-long term vision for managing a global demand collection cycle, data analysis, and RCCP planning for a number of global manufacturing sites (covering a big chunk of the S&OP cycle). Thanks to the Cloud, this was managed through a single, central location, without ever relying on IT.

 While there were challenges, there is a simple way to implement Industry 4.0 cloud solutions to run not only a fully connected supply chain but to facilitate full Integrated Business Planning (IBP).

By sharing lessons learned from my own implementation, I am hoping to give you a blueprint for selecting connected planning  software.

What Does Your Planning Software Need To Do?

You have two overarching goals when it comes to software solutions:

1. To establish a centralized approach to run a global supply chain that will drive major short and long-term decision making for the company.

2. To establish a straightforward way of designing and implementing a fully connected global planning system, including advanced manufacturing and scheduling.

For me, the first takeaway is clear. Make no mistake, this is the way forward! Going forward, traditional supply chains will fundamentally change. Supply chain/demand planning will expand its responsibilities, and will empower decision making across an organization. Some organizations have embraced this already, some are trying, and many are yet to consider it.

Most medium and large enterprises are not in the position to unlock the full potential of their existing data.

Now, let’s focus on the second point, the systems that should empower this vision of the modern supply chain. This is easier said than done. Without one of the best of breed solutions, most medium and large enterprises are not in the position to unlock the full potential of their existing data. Nor will they benefit from a fully connected environment.

The Problems Of Trying To Make Legacy Systems Work

Many companies are still plagued my multiple legacy systems that do not “talk” to each other and require extensive capital and resources just to keep them operational. This is where we are at in my current company. We are at the stage where some progress is being made but a strong foundation is lacking.

And this is no surprise. Experienced systems consultants have had to scramble and acquire new Cloud skills and brilliant graduates are grasping the new technologies and solutions well but lack the functional knowledge. Given that stakeholders will often rely on the experts (that’s us), this means there’s a gap between the functional knowledge and technical expertise that needs to be closed as soon as possible. Generally, supply chain leaders and consultancy firms are waking up to this emerging need for a hybrid mix of skills.

The S&OP Implementation Vision

Below is our S&OP Process vision. Take a few minutes to digest it, because it informs every stage of the design, implementation, and adoption process.

“To provide the required functionality that will enable the wider business planning functions to Plan, Execute and Deliver in a Fast, Connected and Sustainable way against our customer expectations, while providing the required Visibility for the business as whole”.

This is the first starting point for any systems implementation – a clear, strong vision that identifies goals and the purpose. This is your first priority, not a document with detailed requirements or organizational design. Those can wait for a bit.

The rationale behind the keywords in our S&OP Process vision is:

Plan: Be able to collect, analyse and run scenario planning against finite and infinite capacity before committing to the best operational and financial outcome for a given opportunity.

Execute: Be able to run advanced scenario planning for manufacturing scheduling, making the best use of available plant resources.

Fast: Enable quick decision making centrally through connecting commercial demand and RCCP, cutting down the noise and letting manufacturing focus on execution.

Connected: Support a multi-site environment managed through a central location with data flowing back and forth continuously.

Sustainable: Implement the vision while sticking to the budget and further leveraging systems for lean business execution.

Visibility: Enable easy to build, fast and powerful reporting functionality leveraging all available data produced by the above, providing “live” visibility of all levels of hierarchy in the business.

Fully understanding this vision and respecting it as much as possible during the design, implementation and adoption phases is critical to having the right solution in place and selling it internally.

Don’t make the mistake of looking at systems implementation as only an IT implementation!

In many cases, a major change in systems causes subsequent changes in processes, but you still need the right approach for the system’s design. Having in mind the longer-term game of how that will affect processes is crucial for people change management. Don’t make the mistake of looking at systems implementation as only an IT implementation! It’s not. It’s about both systems and people!

The more connected the system’s architecture, the more synergy this will drive down the line for process alignment and adoption, which is key. In other words, it’s not only about “systems driving the right business behavior” or “business process design driving systems implementation”; both are important but on their own neither facilitates an optimal long-term approach.

It’s about making sure the wider vision for systems implementation considers the desired state of business processes and requirements while remaining as connected as possible in order to encourage adoption.

Challenges In Systems Implementation

You should expect some bumps along the way. Some of these are:

– Software being developed for only some areas to save time, not taking the full picture into account in the design phase, making it significantly harder to build and implement any changes down the line.

– ERP not being equipped with functionality for all business areas yet, i.e, advanced scheduling solutions, forcing sometimes complicated links between these niche applications and the ERP which adds cost and complexity.

– Connectivity issues between the core ERP and 3rd parties that are often prone to user error and require manual interventions.

– Continued use of Excel based reports and exports which are updated offline only.

– Disconnected operating sites using their own in-house built tools (still a widespread practice).Lack of scenario planning functionality meaning it is often done in Excel which is prone to errors and time consuming.

– Lack of functional expertise which causes stakeholders to misinterpret key S&OP/demand planning concepts.

Conclusion

What is your experience with supply chain planning systems based on cloud solutions and what do you think the areas of improvement are? Maybe you are currently on this journey and have some key elements to share, at least conceptually. What are they? Or maybe you’re a supply chain consultant dealing with design and implementations – how do you guide your clients to achieve a more connected business environment?

I hope this article has provided some food for thought. I am happy to discuss S&OP systems implementation with both experienced practitioners and people just starting to build their roadmap. Contact me at cristian.circiumaru@gmail.com, connect on LinkedIn or comment below.