About Jeff Shaw

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Demand Planning Function: Where Does It Belong?

Demand PlanningIn a prior blog, “Using Forecasting Software to Drive Specific Business Improvements, Example One”, we emphasized the importance of ownership of the demand planning and S&OP process by a member of the C-suite. Who in the C-suite was not the end-game of that blog, as long as it was someone in the C-suite. But a recent energetic discussion in the Institute of Business Forecasting and Planning (IBF) LinkedIn group brought to light several issues that could drive that answer. I love discussion groups and forums: they are like roundtables that allow the kind of real time crossfire and discussion between thought leaders that was not possible before the advent of this and other online forums. Although not everyone agreed or even had a final opinion to the question of who should own demand planning, some of the issues that came up are considerations before organizational boundaries around planning should be set.

Roundtable Discussion

The following is a collection of some of the opinions gathered from the group as to demand planning organization ownership, together with a summary of the Pros and Cons of each approach.

Ownership Choice 1: Sales & Marketing
In his book on S&OP, “Sales & Operations Planning, Beyond the Basics” Thomas Wallace puts demand planning function in the hands of Sales, with longer-term demand planning with Marketing.

Pros: Sales & Marketing are the closest of anyone to the customer, thus having the best knowledge of demand. Advancements in processes and technologies allow them to have adequate statistical predictors of demand. They can work with customer service more directly to manage the market risks.

Cons: Sales people are good at sales, but not necessarily at predicting sales, so this placement can backfire. Marketing can be more focused on marketing and product analyses than on demand plan generation. Making the demand plan part of the Sales KPI could lead to low forecasts to ensure goals are met, potentially followed by failed customer service when Operations follows the plan and produces insufficient inventory.

Ownership Choice 2: Supply Chain Organization
Recent IBF event polls show that 61% of organizations have the demand plan generated here, with the trend rising. It can often end up here not by deliberate means, but out of Operations frustration of leading an S&OP initiative, or when Sales & Marketing rejects ownership. Business financial analysts could offer support.

Pros: This can be beneficial as an independent, more unbiased group. Higher-qualified statistical specialists are typically on staff.

Cons: There is no influence on pricing, marketing programs, etc., that is available if it were on Sales & Marketing side. Ownership too far from Sales can create disconnects. Smaller companies can often not have the budget to allow for a Supply Chain organization, meaning that another home could be Operations.

Ownership Choice 3: Hybrid
A handful of contributors offered up a hybrid approach, backed up by the IBF forum itself. The idea of the hybrid goes something like this: For the majority of companies, Operations or Supply Chain management would own and manage the planning function, while Sales can own the forecast in terms of the month-to-month unit volume commitment. In effect, the plans produced by Operations/Supply Chain are given to Sales & Marketing, who then identifies impactful factors like marketing campaigns, competitors, new markets, or economic indicators, and over-writes the baseline forecast where appropriate. Analysis would follow on both the original and overwritten plans, with metrics feeding back into the process to identify improvement efforts for Sales & Marketing.

Pros: This seems like a more collaborative approach, taking advantage of the skills of Operations, Supply Chain, Sales & Marketing, or any other organizations adding value.

Cons: Without a strong leader with responsibility and accountability, this could be a chaotic process that accomplishes little, and creates divisiveness between different camps.

My Takeaway on Best Demand Planning Placement

There are opposable forces at work here. There is no right answer, but in any case, I see 4 basic rules of thumb:

1. Do your homework. To pick a method, you will have to do some research and ask some questions. What has worked for others in the past, or companies like yours? Where are your skill sets? Where are the internal challenges that need to be addressed? Are there built-in biases, such as compensation tied to KPIs, or reviews tied to performance, that could affect demand plan judgment? Bias is inevitable, but it can and should be minimized.

2. Pick a champion. I see this as the cornerstone that makes it all possible, no matter what the plan. It all goes back to our blog about responsibility for the results. You need to find one individual that is willing and able to see the demand plan through, and with a passion for uniting different company departments to meet the company’s goals.

3. Enable collaboration. Buy-in from the groups from users through C-level executives is crucial to meeting the real goal of accomplishing the company goals. The stakeholders should feel that their voice and results are considered. Led by a facilitator, the collaborative platform should be in place to maximize communication between different business units, with the same goal of maximizing business effectiveness.

4. Make it repeatable. Make sure that the processes, people, and technologies in place are such that the demand plan generation is repeatable, and results are measureable and provide feedback to the process. The review meetings should be structured with a consensus of the stakeholders all present. The process should be automated and streamlined as much as possible.

While generous focus and energy invested on creating the demand planning structure will yield good results within an organization, continuous improvement efforts should be made to revamp the structure if necessary with lessons learned both internally and externally. A good demand planning organization can defend against market volatility and overcome competitive challenges, and follow a path to a demand-driven, and ultimately a customer-driven, success story.


Stephen Covey on Trust and How Demand Foresight Sees Its Importance

We all know that there are many intangibles that influence success, but I’ve found that one of the most important is trust.

Stephen Covey, Jr. just started his nationwide tour this week here in Denver. He’s the son of Stephen Covey of “The Seven Habits of Highly Effective People” fame, and is headed toward the same success. The speaking tour is built around his book “The Speed of Trust”. As I listened to a promotional radio interview this morning, there were some key elements that I was reminded of that are so important in everyday life, and more specifically in how to build successful business relationships. Some of the high points from the interview:

  • Earning the trust of your client comes from offering value, keeping your word, and being responsive.
  • Lack of trust is like a ‘tax’ on the business relationship. Speed decreases and cost increases due to the additional justification and due diligence that is required to compensate for the lack of trust.
  • Everything is easier with trust – this is why testimonials are so important to get your foot in the door.
  • Long-term clients are created when you build and maintain that trust.

A personal example that I immediately thought of is something that I am still amazed by today. It has to do with a FedEx package and their promise to deliver when they committed. Last Christmas I procrastinated and ordered the perfect gift for my daughter online. Although I was cutting it close, FedEx promised it would be delivered by Christmas Eve. That’s all I needed! Well, the day came, all the other packages were under the tree, and the one key present still had not arrived by noon, 3:00 pm, then 6:00 pm. As you can imagine, I pretty much gave up. We went on with our family’s traditional celebration. But to my complete surprise, the FedEx truck pulled up at 9:00 pm with the package! Now I know the landslide of deliveries that FedEx has during the holidays, so I was willing to cut them some slack. However, I’m now an even bigger fan. This epitomizes how long-term customer loyalty often is won in the save-the-day moments like these, where our trust is rewarded with action.

Now something more relevant. In recent blog posts in both January and February we talked about the importance of choosing the right partner. This of course is closely tied to a foundation of trust. One of our key partners had a big problem in which our trusted partnership successfully enabled us to help them in a big way. On the night of February 7, 2008, an explosion and fire completely destroyed Imperial Sugar’s Savannah packaging facility, taking 14 lives and 60% of Imperial’s production capacity with it. The facility was offline for nearly 18 months.

Imperial needed immediate insight into how many customers it could serve with its available inventory. We worked hand-in-hand with them to ensure that the forecasting software and data were properly configured so that they had an accurate overview by product line.  This allowed them to uphold their “availability to promise” because everyone from production to sales could see, in real time, what could be delivered. Speed was required, and an established, trusted partnership was a critical component to their success, as they later stated in CIO Magazine, “Supply Chain Management to the Rescue”.

I can’t finish a post on trust without referencing the person we learned about in grade school who knows a little bit about honesty–Abraham Lincoln. One of my favorite quotes of his is, “The truth is your best friend”. How true and how important it is in successful business relationships.

Affordable Option for Sales & Operations Planning Software

“Sales and Operations planning”, “S&OP”, “SOP”: is this just a new branding of what I’m already doing? Probably a little bit of both “yes” and “no”. But there really is something new that anyone that’s involved with these processes should be well aware of. Do you know what I’m referring to?

Companies have to plan for their demand and how they plan to meet that demand with their supply. There are different levels of sophistication in each area that vary from company to company and vertical to vertical. However, the basics have to be done to have any measure of business success. So yes, you’re probably doing some form of sales and operations planning out of necessity. Now it comes down to your level of maturity.

The analysts at Gartner research (primarily Noha Tahomy and Tim Payne) have developed a four stage life cycle model:

■ Stage 1: Operational-focused

■ Stage 2: Planning-focused

■ Stage 3: Profit-focused

■ Stage 4: Value-focused

Stages 1 and 2 can be accomplished by process and some basic tools, most commonly, MS Excel. However, to achieve the key business benefits around a one-number forecast, profit optimization, and value chain optimization, a robust S&OP software suite is a must.

It starts with the most accurate forecast you can achieve. This can only be accomplished by simultaneously taking into account not only typical historical information, but also your customer information such as POS, leading indicator information, and not-so-intuitive causal factors. From this most excellent forecast J, the results can be achieved only if the forecast is properly utilized. This encompasses the supply side processes such as distribution requirements planning, inventory management, and purchase planning to name a few. Again, nothing new here. S&OP Stage 1 and 2 are a description of what most companies do now. The new piece are the integrated dashboards and reports layered on top that truly are a big addition to the enterprise-wide visibility of the demand side and supply side that allow decision making for bottom line impacts

Gartner research shows that 67% of implemented S&OP processes are in Stage 2 maturity.

The newer exciting areas are in Stage 3 and 4. This is where you take your S&OP process and make it a true corporate asset. Imagine having the ability to make decisions on maximizing your profits instead of just having product on the shelves. Which customers, with which promotions, with which products should we service first in order to increase OUR gross margins, all while not impacting overall customer satisfaction? The time is now and this is just one example. This does require companies to have more data available to the S&OP process than they have had in the past. But it’s not data they don’t have somewhere.

Our Demand Commander S&OP suite provides the capabilities to achieve these innovative levels of Stage 3 and 4. We offer them in a modular fashion so that you can add the various modules as you need them. Our platform enables a crawl, walk, run approach that supports an organization’s process as it evolves through various levels of maturity. Other vendors make it sound like black magic and charge accordingly. Our approach is transparent and allows you to understand its outcomes. The ROI is very compelling.

Are you looking for an affordable way to make your S&OP process a strategic asset?

S&OP Success: As Much the Partner as the Technology

Here’s an all too familiar reminder of someone that had their holidays ruined by broken promises….

Small? Details?  Why are we writing about this? S&OP initiatives are based on business cases that typically highlight bottom line improvements that carry with them a lot of focus and attention.  And yet, many of these projects fail to ultimately deliver the promised improvements, Why?  There are many variables involved and not all the variables are equal.  There is one specific variable that we have seen that can invalidate the entire ROI and often is the least vetted variable of all.

Evaluating all the features of your future S&OP platform – including the company – that supports your business case is a big job. There are many factors to consider: business process perspectives to the skill sets of your team to the underlying capabilities that are most important to the competitive advantages you have in your market. A great deal of effort goes into initial vendor evaluations, product demos, and on-site demonstrations of the platform with your data. All this is absolutely necessary to make the proper selection of a platform that can and should have a bottom line impact on your business imperatives. However, is it enough?  Does this following scenario sound at all familiar?

After all of this due diligence, you’re feeling pretty good about the platform you’ve selected and are excited about getting the project started. Once the contract is signed, your vendor begins to talk about a slight start delay since they’re got to slot your project in with other projects with other clients. Once you have your kickoff meeting there is some murmuring of a “new understanding” of scope from the product vendor. As you discuss integration design, the vendor “discovers” new data feeds that were not accounted for during the proposal process. As your team gets a better understanding of the product and asks for some tailoring, they’re told that it will require a change request.  The schedule slips and costs go up….

All the due diligence on the platform, its match to your business, and the ROI business case is undermined by a vendor that can’t deliver on its promises. Finding a reputable partner that will stand by their commitments, even when things don’t turn out exactly as planned, is often one of the most important selection factors in separating successful projects from the 70%+ that fail.

The team at Demand Foresight is a group of S&OP SME’s, enterprise architects, and large enterprise company developers that have been in your shoes. We started a company that wanted to take a novel approach to avoid these all too “normal” software failures.  That’s why we came up with a one price, two-part guarantee to demonstrate our “skin in the game” in the spirit of an equally incented partner in your success. Our clients keep telling us how unique this approach is, but from our standpoint, there’s no other way!

Inventory Crisis: Santa’s Forecasting Software Deserves a Lump of Coal

‘Twas the week before Christmas and all thru the North Pole,
Every elf was slaving – his inventory to control!
The gadgets and toys were piled high on the sled,
But some seemed to be missing, so the I.T. guys were dead…
“How could this happen AGAIN,” they all moaned?
“I thought we upgraded – what do you mean, they postponed??”

They cursed their computers and questioned the stats:
“How could this be true – our forecasting software is bats!
We entered the numbers, the graphs, and the plans,
Yet still the result doesn’t meet the demands!”

Then Santa emerged with a large bag of coal.
“You’ve missed it AGAIN? But that wasn’t the goal!!”
Memories of Christmases past flew before him;
His thoughts about inventory grew more grim.

“We talked bout stats, we KNEW they were lame –
Last Christmas we failed, and they were to blame!
I thought we agreed to be bold and more clever –
I thought we banned stodgy old models forever!
We can’t be tied-down by inflexible apps,
Why we’re the North Pole – we’ve got presents to wrap!”

Once again the I.T. guys accepted their coal,
And returned to their desks for damage control.
“Next year will be different!” they resolutely exclaimed,
As they deleted the forecast that got Santa inflamed.
“Smarter software is out there, and we know what it’s called:
Demand Foresight, please help us to get it installed!”

As 2013 draws to a close, we at Demand Foresight hope that you’ve had a great year and look forward to an even better 2014. All the best to you and yours this holiday season!

Santa Claus Holding Finger to Mouth