Krishnan Chidambaram
Simple initiatives add up to big gains. Many professionals feel that establishing a robust demand planning process in an organization is a long and arduous journey. Undoubtedly, there are many challenges, but focusing on some simple steps can make this journey a lot smoother, more enjoyable, and lead to a satisfactory outcome. Here are six simple steps that can go a long way toward ensuring success and a sustained demand planning process with effective demand planning process flow.
Step No.1: Document The Process Roadmap
Depending on the stage of maturity of the demand planning process, an organization has to have a clear and documented process roadmap for improvement, which should include:
A.) Gap analysis of the existing process, and defined/agreed improvement areas along with an outline of future needs and requirements to close the gap.
B.) Priorities of above requirements in stages: short term (3-6 months), medium term (6-18 months), and long term (18 months–36 months). Priorities should be based on quantified benefits that they will bring to the organization. Most process improvement roadmaps focus on qualitative improvements, which should be avoided as much as possible.
C.) Roadmap for each stage. The roadmap should be a SMART (specific, measurable, achievable, relevant, and time bound) output.
D.) Critical Success Factors (CSFs) for each stage. The management team should actively participate, support, and follow up on the CSFs.
Speak the language of the CEO and CFO; that is, strictly in monetary terms pertaining to each demand planning initiative.
Step No. 2: Bridge Cross-Functional Disconnects
This probably remains one of the biggest challenges in a demand planning process. Conflicts of interest, silo approaches to work, lack of awareness, and turf wars are quite common in the corporate environment. However, some simple measures to build cross-functional teamwork and get everyone on board can help. Involve people across functions when developing a demand planning process roadmap. It builds awareness, ownership, and fosters a spirit of partnership. Here is a great article on building relationships and resolving conflict.
Focus on organizational goals of every activity that is being undertaken
Such goals will quickly bring things into the spotlight while generating buy-in from the top leadership. Be it operational meetings, S&OP, business plans, or targets, etc., make sure that the focus on organizational goals is not compromised. It will reduce friction, and actively promote the function critical for business.
Start with the big picture and then work down to the details
Too often when discussions are based on details, the larger picture is lost. Demand planners should lead the discussion starting from a bigger picture, and then move on to details. It is more important to do so when it comes to critical decisions that could cause conflict or inter-departmental friction.
Share success and avoid blame games
This builds trust and ensures that the process is credible and sustainable. One thing that works well is when demand planners start meetings with a note/slide on what worked well as a team and what more could be achieved by working together.
In mature organizations, Sales, Marketing, Supply Chain, and Finance jointly own demand-planning KPIs.
Step No. 3 Build Organizational Awareness and Commitment
In business nothing speaks better than money! The best way to build awareness and commitment is to quantify your goals and objectives clearly and in financial terms. Speak the language of the CEO and CFO; that is, strictly in monetary terms pertaining to each demand planning initiative.
A.) Talk about how each percent improvement in demand planning accuracy can contribute to the company’s profitability. To accomplish it, we have to improve forecast accuracy, say, from X% to Y%.
B.) If focusing on product life cycle management, then quantify the probable financial benefit arising from improving its process.
C.) If implementing a collaborative planning process with a customer, then quantify the benefits in financial terms that are likely to accrue to both the company and the customer.
Step No. 4: Define Key Performance Indicators
KPIs (Key Performance Indicators) are not to measure people. They are the indicators of process performance. The idea behind KPI measures is to focus on improvement and improvement alone. I have seen many organizations where people calculate KPIs only for evaluating the performance of individuals, and/or for a management presentation. Similarly, I have seen people looking for avenues to improve KPI scores if they are linked to compensation. All this dilutes the purpose of KPI measurement. Here are a few of my suggestions:
A.) Review KPIs regularly and religiously. Look for ways to improve the process. Evaluate the process, and identify its root causes. If low KPIs require focus on capability development (people, skills, knowledge etc.), then concentrate on developing those capabilities
B.) Make sure that the demand planning process’s performance is linked across functions, and KPIs are owned across functions. In mature organizations, Sales, Marketing, Supply Chain, and Finance jointly own demand-planning KPIs.
C.) Every month put the KPIs on display where everyone can see how things are going. What is shared is seen. Very often KPI measures are not shared adequately or frequently. If they are visible, they are likely to be discussed. That is a start!
A tool or system by itself does not solve any problems. People do. Training is necessary to ensure that the organization is benefiting from their applications.
Step No. 5 Implement Required Systems and Tools
A robust IT infrastructure and tools help improve productivity and profitability. It is imperative to understand the learning curve required in implementing a forecasting tool or a demand planning setup. Here are a few things that should be kept in mind while implementing systems and tools:
A.) Ask yourself what incremental benefit you will get by implementing a given tool. Make a business case with quantified financial parameters. Only if you are convinced should you proceed to make a request for such a tool.
B.) Don’t implement half measures. In many organizations with advanced ERP systems, the biggest chunk of forecasting continues to be done in MS Excel. Either invest in smart affordable Excel-based forecasting applications available in the market, or invest in training and resources needed to make the most from the existing ERP systems. A tool/system by itself does not solve any problems. People do. Therefore, investment in training and development is necessary to ensure that the organization is benefiting from their applications. Such investments often add up to millions of dollars, and should not be wasted.
Step No. 6: Manage Change
A demand planning process should be equipped to absorb change in the business environment. Typically, the process is challenged when a business is not heading in the right direction. At other times, when business is good, the process might not get proper attention. So managing the change is critical. To accomplish that you must:
A.) Sell demand planning to your organization, while understanding fully your business environment.
B.) Communicate, communicate, and communicate regularly. At least once a quarter share with your stakeholders process roadmaps, tangible benefits arising from it, successes achieved, improvement areas, etc. Do so positively and with zest.
C.) Make sure that demand planners are seen as high performing individuals in an organization. No role allows the kind of business visibility that a demand planner gets in an organization—from customers to production and suppliers. To attract talent, sell the demand-planning role as a stepping-stone for bigger strides in your organization.
D.) Rotate your demand planners once every two to three years. Give them a new category to handle or assign new responsibilities to them. The demand-planning role is a high pressure job and can get very predictable if the process maturity in an organization is high. It can get monotonous after two to three years if the job is not redefined properly.
E.) In tough times, the leadership function should assume the role of guiding the demand planning process. They should ensure that the process is not challenged for quick gains. In a volatile business environment, it is critical that the demand planning role is duly recognized for the value that it can bring to the organization.
These simple steps can add significantly to the value of the organization. I hope readers will find them useful and insightful enough to put them to practice!
This article originally appeared in the Journal of Business Forecasting Winter 2011/2012 issue. To receive The Journal of Business Forecasting and other benefits, become an IBF member today.