How Many SKU’s Can A Demand Planner Handle?

Robert Langenhuizen

Driven by a recent discussion at my company, I recently raised a question on the IBF’s Linkedin discussion group; can a demand planner do its job in half the time? The initial reaction, was, ‘of course not.’ But, as timed passed, the responses started changing. The most common answer was “it all depends.”

The answer can be found by examining why, how and what is being sold, produced or served. If the main business is in FMCG with very short lifecycles, spending all your forecast efforts on certain SKUs is the way to go, because detail is necessary and time is short. In a multichannel environment, the answer depends on how much detail is really needed. A business with 10,000+ SKUs certainly doesn’t need detailed forecasts of every item. The detailed forecasts of 30% of the SKUs should be sufficient. For businesses with few hundred items, it is different story. The decision to use a forecasting tool or generate the algorithms in house influences the answer.

The baseline questions include:
• How much detail is needed for the forecast?
• How many forecasts, and how much accuracy is needed?
• Are the tools being used right for the job?

The consensus on the number of SKUs per demand planner was around 500 SKUs . This is, of course, an average figure based on the answers to the questions above.

Every business is different, even within the same market. In my business, wine distribution, it’s more difficult to please a restaurant owner with a wine chart than a big retailer with relatively stable demand. The weather heavily influences our market; beach clubs don’t sell as much liquor in the rain. In the warm summer, it can be difficult to keep up with their demand. Telling them their house wine is unavailable because the algorithm predicted a downward trend will be a recipe for losing a customer. As a demand planner, keeping your eyes and ears open at all times is imperative for predicting market movements.

In the end, examining everything including the how and why of forecasts will yield the best answer.

 

Robert Langenhuizen, CSCP, CPF
Demand Planning
Oud Reuchlin & Boelen

Robert Langenhuizen is Senior Demand Planner at Oud Reuchlin & Boelen, the oldest and one of the biggest importers of quality wines in The Netherlands. Focused on the foodservice industry and the specialist stores, this company is known for its broad premium portfolio and long history in the Dutch wine market. Oud Reuchlin & Boelen is member of the Baarsma Wine Group which focuses on distribution of wines within North-Western Europe. Robert has earned his bachelor’s degree in international marketing at the Rotterdam Business School for Economics. After his study he held several positions in an international business environment, where he got acquainted and fell in love with SCM and demand planning. Robert has expanded his knowledge with APICS Certified Supply Chain Professional and IBF’s Certified Professional Forecaster. His expertise includes S&OP, inventory control, demand planning & management.

 

 

One Response to How Many SKU’s Can A Demand Planner Handle?

  1. Dear Robert,

    You are spot-on… However, 500 average is also too much. I will suggest here to focus more on your priorities and for that 80/20 rules is best to apply.

    All the best…
    Regards,
    Abdul Mohi

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