One way for a demand planner to reach the other side of the shore is to always question your process, reporting, and audience needs. Market dynamics are changing and so are the company’s needs. The author outlines what the demand planner has to do to succeed in this profession.
“26 years of experience is working against him. He figures anything big enough to sink the ship they’re gonna (sic) see in time to turn. The ship’s too big with a too small rudder. Everything he knows is wrong.”
– Brock Lovett, in the 1997 movie Titanic
This quote by Bill Paxton’s character in the movie Titanic played over and over in my head on my flight home to Chicago last October. Hours earlier, I had finished presenting my company’s process at the IBF conference. When I finished, no one queried about my process. They inquired about my knowledge rolling out SAP’s Advanced Planning Optimizer (APO) — on which I had made only a three second comment. This bothered me. I realized I could become that captain. I had 17 years of experience with companies like Target and Lands’ End working against me.
Then, much like that iceberg, an epiphany struck. I realized the process I discussed was the process we use at Hollister, Incorporated, which relied too heavily on my past training. Demand Planners spend their days portraying themselves like Switzerland between two warring factions: The creators of demand (Customers, Sales, and Marketing) and the satisfiers of demand (Procurement, Manufacturing, and Logistics). I rarely struggle with being the neutral country when managing the demand plan. But, I misplaced my sensibility to remain neutral between my internal (sometimes external) customer and the forecasting and demand planning process.
I would spend the next five hours of my long journey home soul searching. I remember my Operations Management professor explaining why Japanese automakers perfected the process while their American counterparts struggled. Sakichi Toyoda developed a technique called The Five Whys. Basically, they would identify a problem like, perhaps, a sudden acceleration issue. Then the engineers would ask the first why: Why are these particular Toyota models accelerating suddenly? The electronic throttle control system failed. Why did the electronic control system fail? And the whys would continue. If no more questions of why could be asked, then it was assumed the engineer arrived at the root cause. I have applied this technique often in my personal life as much as in my professional life.
Seeing the Iceberg
And so it began. I do not recall the exact thought process. However, I noted two consistent patterns multiple times while working through the Five Whys. First, the answers were self-centered: They all started with “I,” not “we.” Experience overpowered internal customer needs. It created a blind spot to developing communication and reporting, both of which are supportive of effective business interactions. I know my audience. Did my reporting and communication reflect the audience needs? Or am I communicating what I think they need? Clearly the answer was the latter.
The telltale symptoms of this communication illness supported my concern: Recent attendance at the Demand Planning S&OP meeting has started to wane; internal customers have started to reschedule established monthly meetings; and, above all, meetings that used to last 45 minutes to an hour are now down to 30 minutes at most.
Second, the simplified process was a reaction to data integrity issues. The data view was high enough that it obscured potential problems. My reaction should have been a well-planned response. While the forecast accuracy at my company improved at a product line level to 90%, opportunities abounded in other areas, like improving event forecast metrics and developing a SKU level review schedule based on accuracy, bias and variability. So, did I produce accurate and trustworthy forecasts? Is there room for doubt? Again, the answer was the latter.
My experience indicated a high level of personal credibility. But that was not enough. My forecast accuracy was consistently at or above 90%. That was not enough either. There were symptoms of credibility illness as well. Despite my best forecasts, a production planner decided to produce less of a key item—a familiar tale with a familiar outcome. Marketing pushed up a new product launch date assuming the forecast would continue to be higher than demand. There were definitely outwardly signs of discord.
Here I had a communication and credibility opportunity — even after 17 years in the forecasting and demand planning field.
Whoa! Wow. Really? Nah. (Sigh.)
There were two reasons for that sigh. First, I stepped outside O’Hare airport to a stunning 40 degree drop from where I was only 200 minutes earlier. Second, I realized that I had awakened something that could not be quieted. Have you ever gone into the garage only to organize your toolbox? Once you get there, thoughts migrate to organizing the gardening tools. Hours later, your entire garage is spotless even though the “Honey-do list” had only called for straightening the toolbox. Well, I realized I would have a very clean and organized garage soon.
Crossing the Rubicon
This moment was much like Julius Caesar’s decision to cross the Rubicon River. The decision was a defining moment. If he stood on the shore, it would mean surrendering his governorship. On the other shore, it would mean treason against the Roman Senate already fearful of his popularity. Roman historian Sueronius noted Caesar approached the river with trepidation. I knew I had to cross it — without a doubt.
With two important identified concerns, I embarked on a journey of reinvention and re-invigoration. How did I accomplish this? I challenged everything. No process or report was satisfactory. I criticized every aspect of my responsibilities. What value does this report, process, or responsibility bring to the corporate mission and the bottom line? Who does this report or process serve? Can any decision be made from my output? How can Demand Planning become invaluable to this company?
In practice, I relied on everything I knew, and doubted nothing. I am successful. Some of my accomplishments achieved million dollar status. I pulled together great ideas from past career successes, reviewed manuals and documentation, and reread performance reviews for more ideas.
For innovation and inspiration, I reviewed every IBF presentation for the past three years — ones I personally attended and others I did not. This was therapeutic as well. This confirmed that I was not alone with these outwardly simple yet inwardly difficult challenges. I reviewed notes in the margins. If you are not already doing so, I recommend downloading all the presentations prior to attending an IBF conference. The slides provide insight on not only the main focus of the presentation but also a feel for the presenter’s expertise.
In refreshing my education, I reread Chaman L. Jain book, “Fundamentals of Demand Planning & Forecasting,” which is often referred to as the “Demand Planner’s bible.” For those preparing for certification as a Professional Forecaster, this book is highly recommended. I concur for two reasons. One, this book comprises the best of the best in business forecast practices. While the non-technical could be viewed as subjective, common themes resonate throughout the individual articles like the proper role of statistics, communicating forecasts to management, and factors for success in this infant career field. Meanwhile, other sections serve as a good refresher on statistical know-how.
As a companion to the Fundamentals of Demand Planning & Forecasting, the quarterly Journal of Business Forecasting has become another source of re-education. The articles in this publication, built on previous editions, keep readers current on pressing topics and are a wonderful source of brainstorming ideas. I often scribble new ideas in the margins of my copies of this journal.
As the brainstorming, collecting of ideas, and pulling together notes continued, I realized this is not starting over. This is not about ignoring what got me to this point in my career. This is about allowing wisdom to guide me in determining relevancy of an idea or note. For example, while CPFR with my previous company was an extremely useful tool, it does not apply to my current company’s business model (yet). In my opinion, the medical device industry has not reached the level of collaboration like that found between big box retailers and their manufacturing partners.
Also, some ideas were not financially or technically plausible yet. And I stress “yet.” I identified these constraints specifically by de-constructing the obstacles preventing me from achieving execution. In my business, we forecast customer purchases separately from sample requests from sales reps and clinical nurses. This functionality is available in North America only. I want to expand this ability to forecast sampling needs to the rest of our global business units. This expansion requires additional resources. However, finance rolled out a new system that could use the ability to separate revenue from sampling demand. Plus, I showed our German team members the functionality. They would like to forecast demand separate from sampling as well. So, the momentum is building. I expect to achieve this in the next 18 months. In the end, the aforementioned effort generated ideas that generated ideas that generated ideas, and so on.
Reaching the Other Shore
Those ideas were rounded up and siphoned through for relevancy and execution. With these, a succinct and disciplined approach emerged.
- Reporting format must match the corporate financial standard
- SKU by location (SKU-L) should be maintained at appropriate intervals based on volume and variability
- Naïve forecasts should be used as a performance measurement
- New product forecasts must be scrutinized for plausibility
- Marketing and/or product managers must be accountable for KPIs
- Targets should be clearly defined on all reporting
- Event forecasts should be identified and measured
- Executive summaries should be created for presentation at monthly Demand Planning meeting
With all these, transparency will be achieved, communication will be improved, and credibility will be increased.
The final output, a part of executive summary, should include detail of any metrics that may be out of tolerance, follow-up actions, the demand plan numbers, the important event opportunities/risks, and an event summary by country. The format of the Demand Planning executive summary is modeled after the Pre-S&OP reporting. The overall look and feel of the report should align nicely with the overall S&OP process as well.
I surveyed my internal customers about the previous demand planning process. I will solicit their opinion about the new one in August. This was not a walkabout where one strays out alone; rather it is an effort supported by feedback and championed by management. I look forward to comparing the feedback of both processes. So far, the feedback has been positive.
When I arrived at Hollister nearly four years ago, the monthly Demand Planning S&OP meeting consisted of reviewing past performance with limited attention to future events. While historical performance confirms the validity of past efforts, it does not necessarily guarantee predictors. Event management better determines the future.
Today, the process and its reporting mostly focus on the future. They narrow in on the opportunities and risks facing the company. They communicate those opportunities and risks. They provide us the discipline to make adjustments only as necessary.
So I am grateful to my audience last October in Orlando and to the IBF for the opportunity to expose a process in disrepair — to reveal the tip of an iceberg. Unlike the Titanic, I now possess a bigger rudder to proactively avoid that collision by communicating course corrections based on credible reporting. I look forward with renewed enthusiasm for the Demand Planning field. What trans-forecasting journey will the next 17 years unfold?
As published in the Summer 2011 issue of the IBF’s Journal of Business Forecasting (JBF). All Rights Reserved.