Managing Complex Demand Signals and Forecasting in a Highly Promoted Environment at Kellogg’s

complexityBack in February at an IBF conference, I heard Rick Davis, Vice President of Business Planning at Kellogg’s talk about their journey over the past 13 years. He reflected on a time when promotional planning was relatively easy, “make it and sell it,” a supply driven environment. Well, it’s not like that any more! As Kellogg’s grew, so did the complexity of the supply chain. As new products became integrated and product line extensions grew, so did the promotions. As Rick stated, “while promotions drive the business they also drive complexity”.

The Journey
Parts of their journey included the need to integrate the various demand signals and begin to synthesize the data. As the product lines grew so did need for product segmentation. As we think about increasing complexity, we should begin to align with the value of segmentation activities. Segmentation strategies allow us to group products based upon a combination of particular attributes. Unlike product groups, which are a static division of products, product segmentation enables you to work with dynamic attributes. As we understand the dynamics of the products we are more likely to understand variability and its root cause. Segmentation can also assist in creating exception based approaches. In my prior experiences I have dealt with greater than 64 million store/sku combinations, clearly a call for exception based management! Segmentation can be a “heavy lifting” exercise but the benefits generally outweigh the effort.

People & Structure
Rick also discussed the integration of people and structure. Critical to the success of the journey is the development of the structure as well as the people involved in the decision making process. In his organization, Demand Planners were expected to be the demand experts. In an effort to build and foster this education, all of the demand planners will complete IBF training and certification in 2013. Credibility and step change management were highlighted as contributors to success. Of course, the integration of people and process also requires a degree of change management. And the speed to which change management occurs depends upon several factors, including; the size of the organization, the legacy of the structure and the extent of involvement at the executive level.

Your comments, thoughts, and experiences based on the above are welcome.

Joy White
Vice President, Inventory
OfficeMax

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