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I have never seen two demand planners working in the same way. Sometimes I am really surprised how different the same role can be in different organizations – or even within the same organization. There’s one universal truth, however: that interaction with sales teams is challenging, and getting the most out of them requires a well-thought out plan.

The worst-case scenario I can imagine for a Demand Planner is where they are limited to the role of “stock provider” who merely takes figures from Sales and maintains the system. The best-case scenario is when a real partnership is built with Sales teams where they provide not only quality inputs for forecasts, but collaborate with Demand Planners about how to best quantify their input.

Sales Are Not The Enemy

A stereotype outside of Supply Chain is that Demand Planners have the wrong priorities, like focusing on forecast accuracy metrics instead of fulfilling customer orders. I think that all Demand Planners agree that they’ll be in much bigger trouble when there’s insufficient stock to fulfill customer orders than failing to meet accuracy targets. But it is up to us as Demand Planners to communicate how things like forecast accuracy metrics help ensure there’s sufficient stock to fulfill customer orders. A lack of understanding and transparency about what we do erodes confidence in the forecasting process, and can lead to a situation where agreement on final numbers is driven by silo-based interests instead of fact-based analysis. The work of Sales teams and Demand Planners should be complementary, not competitive – and that means being transparent about what is it you’re doing and how it serves the aims of Sales.

Here I share two scenarios of cooperation with Commercial teams, one ineffective and one effective.

How To Ineffectively Work With Sales Teams

Coming to the meeting with pre-defined numbers from both sides is not the best idea. Why is that? Firstly, because two teams are doing the same work, and it is a waste of time for two functions to do the same thing when it can be dome by one.

Secondly, a competitive approach to the numbers is pointless – it does not help the company gain an accurate view of future demand. What’s more, the Sales team is likely to win this pointless game every time for one simple reason: asymmetry of information. Both Demand Planning and Sales have the same historical data but Sales has the advantage of knowing upcoming events that will impact sales orders. By events I mean activities that will not only boost sales like promotions but also other factors that can negatively impact demand (lack of repeatable promotion, loss of distribution, price increases etc.).

At this point we need to ask an important question: Should Sales teams actually be involved in forecasting at all? Let’s move to the second scenario where I will provide the answer to this question.

How To Effectively Work With Sales Teams

Sales should focus on selling, not forecasting. But they do need to be part of the S&OP process. There are 3 major areas where they need to add value to the S&OP process: providing unbiased, quality information; consulting on final figures for the forecast; and providing input to post-validation of forecast accuracy.

I will expand on each of these points:

Providing unbiased quality information: An example here would be promotions by a customer (type of promo and when). The action for the Demand Planner would be to find in historical data what kind of uplift was generated by similar promotions by this customer in the past, and combining it with statistical forecasts for the remaining customers to arrive at a total figure for whole market. The above discussion between teams can happen at the first demand review meeting whose aim is to gather assumptions to prepare the forecast. Methods for including the promo uplift data into the statistical forecast is a topic for very long debate, and I will not go into details in this article.

Consulting on final figures: Once the Demand Planner prepares the forecast based on a combination of statistics and the estimated promo uplift, Sales should tell us if these figures makes sense. If not, what assumptions should be changed or estimated differently? Is the statistical trend wrong? Should promo volumes be projected differently? This discussion ideally takes place at the second demand review meeting before reaching consensus and presenting the forecast to upper management. The level of discussion is not SKU level, but rather product group or another aggregation level that makes sense depending on the business.

Input to post-validation of accuracy results: Updating the plan/forecast is only one side of the coin, similar attention should be paid to post-validation of forecast accuracy and finding the root causes of errors. Here Sales plays a major role as they have access to all market knowledge that helps to interpret actual sales data. An example here is ad-hoc promotion initiated by customers which explains a sales peak that was not accounted for in the forecast. The role of demand planner is to keep track of circumstances that can explain data anomalies.

There are 3 benefits to be gained from proper documentation of forecast error root causes. Firstly, it gives us information to be used in future (like overly-optimistic assumptions for promo sales or new products). Secondly, this information helps us to clean sales history or decide about adjustments to forecasts for corresponding months next year. Thirdly, it means we have documented knowledge that we can pass on to the new Demand Planner when the current one leaves the company or changes his/her role.

The above points can be summarized by below graphic:Summary

Sales’ engagement is critical for a successful forecasting process and, subsequently, a successful S&OP/IBP process. One question that remains is what their actual role should be in the process. Should it be preparing their own high-level estimations or focusing on providing reliable information? I am signing up for the latter. Obviously, information provided by Sales will always carry some degree of uncertainty as customers can change their mind at the last moment.

Sales teams should not hesitate to give their opinions, and be prepared to consult on, and sign off on, the official figures. However, they should not spend time on preparing their own estimations as this is the Demand Planner’s responsibility and area of expertise. Although it takes time to break silos and build trust between functions, the above efforts can deliver better forecast accuracy and better control of planning.