Effective demand planning requires good processes, agile systems, and talented people. Getting these all to work together requires a culture that rewards performance with opportunities for career growth as was as financial benefits.
All too often, I have seen companies try to improve their demand planning by investing in updated reporting systems and more elaborate processes. What’s often missing is a human element that can make or break the overall planning program. Without the right culture it’s hard for the demand planning function to flourish. We often blame people for not performing as expected, and ignore the environment that people work in. Without the right structure, it’s hard to perform well.
So what would a culture that supports effective demand planning look like? Here are 6 key elements that I believe contribute to growing an effective demand planning program.
Leadership That Believe In The Value Of Demand Planning
No demand planning program will survive very long without leadership support. The attitude that the leadership team has regarding planning will impact every aspect of the planning process, and all the people involved in it. Leaders who believe in planning promote it within their own company and to their suppliers and customers.
They regularly participate in planning meetings and support and challenge planners in their attempts to turn conversations about the business into numbers and plans. And they protect everyone involved in the process from undue criticism when reality intrudes and plans fail to predict the future correctly. The leaders don’t need to be experts in planning, but they do need to show consistent interest in the success of the planning programs.
Hiring The Right People
This is perhaps the most difficult piece, as Demand Planners are often hired based on their skillset. If a candidate’s skillset matches the company’s current needs, this is often a determining factor in hiring. And in many cases, this is a good tactic.
However, demand planning often requires analyzing and managing problems that do not have predictable patterns and have not been seen before. Every business and every customer has unique needs. So, while having a solid skillset is important, being able to “figure things out” is often a critical skill that cannot be measured by a list of qualifications on a resume.
When hiring a new Demand Planner, I recommend asking for examples of how the person has effectively handled these kinds of situations in the past. How did they solve a specific planning problem when they had few resources to do so? For example, how did they plan for an item that was completely new to the company, where there was no historical data to use as a base for future planning?
In addition, look for Planners who can handle being criticized for providing inaccurate data. Even though we all know that forecasts are never 100% accurate, some people will expect perfection. And they will often express their discontent by criticizing the Demand Planner. So a Planner who can professionally and calmly explain the rationale behind the numbers and maintain the confidence of the S&OP team members will have a much greater chance of success.
Training
Every company has its own unique way of managing the data that drives planning. New Demand Planners are often expected to teach themselves how to properly use the various systems that they use each day. While being “self-taught” has its advantages, it often also means that there are gaps in the Planner’s knowledge that only proper training can fill. And while training is often expensive, the lack of training can mean that users make expensive mistakes, take longer than necessary to master the key skills they need to be effective, and develop workarounds that often bypass the tools that would otherwise help them in their work.
As part of each Planner’s annual evaluation, I recommend asking what training they would like to receive in order to be more effective in their day-to-day tasks, as well as what training would help them advance in their career. Encourage them to look outside the company for training programs that the company may not be able to offer. And encourage them to visit the customer locations to see how the products they plan are displayed, and how their competitor’s products look on the shelf. Visiting customers with a team of sales and marketing people can be a very useful training activity for all involved.
Appropriate Performance Metrics
I am sure that most people reading the heading for this section immediately thought of forecast accuracy as the key metric for demand planning performance. And this is certainly important.
I believe the most important metrics for Demand Planners are communication and leadership. Without these there is no way for a Planner to meet the other, more common metrics such as bias and MAPE. Communicating item performance issues in a manner that other S&OP partners can understand, and then leading them to take action by recommending actions to improve forecast performance are key roles for any Demand Planner.
I can already hear the complaint that communication and leadership are hard to evaluate. So is nearly every activity that makes a person effective in their role. (Ask any group of people what makes a good teacher and you’ll get a different answer from every person.) I admit that measuring effectiveness in these two areas can be subjective. But I believe we must try to measure it.
One way I have seen this done is through measuring the actions a Planner recommends and whether these are implemented and effective. In my own career I kept spreadsheets for issues that I have communicated, along with my recommended actions. I tracked whether recommendations were accepted, who was accountable for acting on them, and when the actions were expected to be completed.
This not only helped me track what needed to be done, it also added accountability to everyone on the team. People knew what issues were being addressed, who owned resolving them, and when the issue should be resolved. This measured both my ability to communicate clearly as well as how effectively I was able to lead the team to take action.
Effective Tools
If you want to know if the forecasting and planning tools your Planners are using are effective, look at how often they revert to Excel to get their work done. While Excel is certainly a helpful tool, all too often it is used in place of other systems that are too hard to use or where the user has not had sufficient training. Exporting data from a system to make it presentable to a larger audience or to do analysis is understandable. But when users must do this with too many systems, it tells me that the original systems are not being used properly. Often this is because they are not designed with the user in mind. Properly designed user interfaces can make even the most complex systems more user friendly and increase usage of these expensive systems.
Key metrics for all members of the S&OP team should be easily accessible and not require exporting and reformatting before they can be presented to others. Forecast data especially should be easily accessible and reported in both units and dollars for each period.
In addition, planning systems must be stable and updated regularly. Plans based on shifting or incomplete data will undermine the entire process. Everyone on the S&OP team needs to know when systems update and how to report issues with each system. And as the business evolves, reporting systems should be updated to reflect the new reporting needs.
Clear Career Growth Paths
Nothing discourages an employee more than realizing that their current position is a dead end. And Planners who are good are sometimes discouraged from looking to advance since the company benefits from them staying where they are. In their role Demand Planners can impact every area of a company – Finance, Sales, Operations, and Marketing. If they are encouraged to learn how these other areas function and what skills are needed to perform well in them, they may find that they have an interest in moving into one of these areas.
I believe they should be encouraged to seek out other suitable roles, and that management has an obligation to support them in this process. Part of every Demand Planner’s annual evaluation should be an investigation into what other functional areas interest them. They need to know that they have a future with the company if their interest shifts to another role within the company.
It’s too easy to believe that poor demand planning is the result of an individual Planner’s poor performance. I believe we need to pay more attention to the environment that Planners work in and ensure that it is conducive to the Planner’s success, career growth and promotion. Once we create an environment where Demand Planners can thrive, then we can begin to properly evaluate our Demand Planner’s individual performance.