Demand Planning and Forecasting is about people, process, and technology. Unfortunately, the people element is often forgotten. As supply chains evolve to become more demand-driven, the Demand Planning role also needs to evolve – and that means that companies must focus on creating and maintaining a talent strategy. What we need to do is hire ‘artists’ and ‘scientists’. We must define their roles and responsibilities, give them the right training and opportunities, and measure their performance.
For the demand planning function to succeed, organizations must have in place:
- Strong talent based on core competencies
- Right career-path culture and visibility within the organization
- Proper training and development
- True performance-based management
Give Up Trying To Find The Demand Planning Unicorns
Demand Planning and Forecasting roles are not created equal. A good Demand Planner will have strong analytical and critical thinking skills and a broad understanding of end to-end supply chain functions, while excelling in a core competency, or holding subject matter expertise. According to a survey conducted by Supply Chain Insights, a Demand Planner is the second hardest supply chain role to fill in an organization, followed closely by Director of Supply Chain Planning, Manager of S&OP, and Supply Planner. The reason for this is pretty straightforward; historically, organizations have looked for an individual who is analytically minded yet can still deal with ambiguity and relate to people. They seek that rare unicorn who has the seemingly contradictory ability to make sense of the data, then sit in front of Sales and Marketing and speak their language.
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That is not an easy combination to find. What they end up with is the Jack of All Trades but Master of None. An organization may be better off building a team of focused individual skillsets that complement each other. Understanding the needs of the department and skills of the people allows us to structure roles to around the expertise of each individual and better serve the needs of the department.
Master of Science (Demand Analyst)
This could be a more centralized role in many companies where one would generally be responsible for generating a statistical baseline forecast. People in this role are mostly analytical with less interaction and inputs required to create a final forecast output. A such, they are capable of managing more SKUs. The Demand Analyst may be the go-to person to provide ad hoc analysis in support of other functional areas with deeper statistical analysis. Many companies that are creating Centers of Forecasting Excellence are staffing primarily with analysts as opposed to traditional planners.
Master of Art (Demand Planner)
The goal here is to refine a statistical baseline forecast. This person would be less reliant on statistical skills but has a deep understanding of interdependence. Demand Planners can work with the commercial teams, running ‘what if’ simulations to adjust the forecasts based on data, analytics, and domain knowledge. The ideal planner asks the right questions at regular meetings with Sales and Marketing and instils a sense of partnership with them. As supply chains and companies evolve, specialized roles may be introduced to the Demand Planning function. For example, companies at higher stages of maturity may create a more senior role tasked with representing Demand Planning in broader supply chain transformation initiatives. The advancement of an S&OP process may require the leadership and support of an S&OP coordinator. Product Lifecycle Management (PLM) could require either deep analytics to support other areas in the organization or a Launch Leader (Product Innovation Planner) role that is highly collaborative.
Measure Accuracy And Performance
We all know or have heard that forecasting is a brutal job. There is a perception that Demand Planning is the punching bag of the S&OP process. How often have we heard that Demand Planners are always wrong?! And in reality, the closer they are to getting it right, the more likely it is that somebody else will take credit for those results. With this in mind, Demand Planning leaders should expand the scope of criteria that planners are evaluated against. This should really go back to the core competencies of the planner and the value they add to the forecasting process.
One way many leading organizations are measuring this is with Forecast Value Add (FVA%). The FVA% concept is designed to determine which, if any, steps in the forecasting process – particularly those steps conducted by practitioners – improve forecast accuracy, and which do not. This can be used to evaluate an analyst-generated statistical baseline model against a naïve forecast or the effectiveness of a planner’s overrides to that baseline. This helps the individual practitioner to better understand their individual impact on the collaborative process and provides feedback on their contribution so they can improve. This helps the company to better identify the drivers to forecast accuracy and measure the inputs and process rather than just the variability. Performances metrics should include effective collaboration with stakeholders, oral communication and conceptual thinking. [Ed: See this article on incorporating FVA analysis in your organization]
Build Pathways For Demand Planners
Leading companies also understand the importance of people and do a really nice job in creating a career path for their employees. When a new employee joins the organization, they meet with that individual to not only identify the expectations of the role over the short term, but they also discuss the individual’s long-term goals. Often these goals include the individual’s interest to move up or across the organization. Leading managers look for opportunities to get the individuals exposure to their interests through cross-functional projects or by encouraging participation in relevant meetings. That way, when the role does open up, the individual is ready. When done correctly, the individuals are incentivized to deliver results in order to prove they are ready for the next step, and the company continues to groom leaders. When done properly, with talent based on core competencies, the right culture, proper training, and performance-based management, companies become their own ‘recruiting factory’. They constantly produce top talent and improve its forecasting ability and accuracy.
This article first appeared in the Journal of Business Forecasting Spring 2016 issue, written by Eric Wilson CPF and Jason Breault. To gain access to the Journal Of Business Forecasting and a host of other benefits, become an IBF member today.