IBF recently asked demand planning leaders how they are guiding their companies through the pandemic. The following reveals the key insights from those conversations.
What Are Planning Leaders Doing Differently To Combat Covid-19?
Many companies have rushed to establish new, collaborative processes to understand the evolving demand and supply picture, and how to best respond from a supply perspective. In some cases, companies with mature planning organizations have realized that these processes are already in place, Camila Sierra, Sr. Director, Global Planning at Converse, commented, “We realized very fast that those forums that we were trying to create were just the S&OP forums we already had, and that all we needed was the right people round the table.”
“We realized very fast that those forums that we were trying to create were just the S&OP forums we already had”
An existing S&OP process has also proved valuable at Orchard Therapeutics, a global leader in gene therapy. Cristian Circiumaru, Associate Director, Global Supply Chain, revealed that before Covid-19, Materials Management and Inventory Management weren’t an issue – but they soon became one as supply suddenly became in doubt. They expanded S&OP to include Materials Management and Inventory management, as well segmentation of suppliers to better manage sourcing.
In Times Of Crisis, Get Back To Basics…
We may be embarking on the age of predictive analytics and big data, but a key theme for the planning leaders we spoke to is to recognize the limitations of new technologies when the inputs no longer make sense. “My biggest lesson learned last is to get back to basics”, observed Circiumaru. “Put the focus more on quantitative insights in demand planning rather than relying on sophisticated mathematical models. Yes, we have the technology now to support new models and those are in play as we speak, but refining qualitative insight is very important in 2021 to drive new changes in the forecast models”.
“My biggest lesson learned last is to get back to basics”
…Or Speed Up Innovation
Camila Sierra is currently drawing up plans for Converse to update their forecasting and planning systems, with Covid-19 having exposed the weaknesses of legacy systems and traditional modes of working. “We’re investigating automation because our teams are overworked, partly because they’re using too many spreadsheets”, she remarked. She continued, “We’re looking how to use technology to drive S&OP and create scenarios for more informed decisions. We’re creating an investment plan for the next couple of years to improve this area.”
“We’re investigating automation because our teams are overworked…too many spreadsheets”
A Temporary Return To Supply Driven Planning?
We asked Wallace DeMent, Sr. Demand Planning Manager at Pepsi Bottling Ventures how he is reacting to Covid-19 disruption, “I’ve been with the company 42 years now, but I haven’t seen anything like we’ve experienced with this pandemic. We’re used to basing forecasting financial plans and sales demand plans on what we thought the consumer would buy. We had a rude awakening having to base plans on what we are allocated from raw materials suppliers. It was a definite a paradigm shift in how we do business”.
“We had a rude awakening having to base plans on what we are allocated from raw materials suppliers”
Of course, S&OP doesn’t fix the supply shortages many companies are experiencing, but it can help companies work around them. At Pepsi Bottling, global aluminum shortages mean they must limit production of many of their core offerings – drinks cans. S&OP allows DeMent and his team react to a weekly allocation of raw materials from suppliers in a timely fashion. A weekly S&OP meeting adds value by communicating to Production what materials are available straight away. DeMent says that daily meetings are sometimes necessary to communicate changes, with early morning and late-night meetings currently the norm.
Combining S&OP & S&OE To Make Supply Chains More Agile
Circiumaru says that at orchard Therapeutics, they are relying on projections from their commercial and business development teams, employing forecast techniques based on population data and prevalence of diseases. He told us that the key is having a ‘control tower’ for supply chain, “As long as you have a solid foundation for S&OP, you have visibility into the entire supply and demand picture. We’re moving to a weekly S&OE process, which complements the full S&OP cycle. For Circiumaru’s therapeutics business, this visibility into demand and supply is not only desirable but absolutely critical, “Our service levels need to be 100% otherwise patients die.”
“Our service levels need to be 100% otherwise patients die”
Creating this control tower needn’t be complicated. Relatively simple and affordable tools can provide the much-needed visibility. “It can be as simple as, say, Tableau”, Circiumaru observes. “Someone who knows Tableau can plug in a bunch of data sources and spit out meaningful insights”.
Scenario Planning When You Cannot Forecast 6 Months Ahead
Forecasting is relatively straightforward when demand variability is stable. But when demand is highly volatile, new methods must be employed. Camila Sierra observed that at Converse “It’s been a challenge not being able to use any historical trends. We’re looking more at the last 90 days and where are our consumer buying. We also have to trust our senior leaders in terms of their bets on where the market will be in 6-12 months. Nobody has a crystal ball, but we need to make decisions. What has helped us is setting priorities like protecting margin vs revenue. That has helped us build a couple of scenarios that we can plan around.”
Cristian Circiumaru echoed the need for this kind of scenario planning to build demand plans around business priorities, “You need to take the principles of CPFR and expand them to Marketing, Brand teams, Product Development and Packaging teams. You want to have conversations where you explain different scenarios and their impact on cost-to-serve in terms of packaging and marketing etcetera.”
“Have conversations where you explain different scenarios and their impact on cost-to-serve”
For companies with existing S&OP processes, this is bread and butter; those without will have to scramble to establish the necessary collaborative forums.
KPIS In Times of Crisis
It’s not just processes that have to change when disaster strikes – performance metrics must change to. KPIs don’t always track what’s really going on in the business right now, says Wallace DeMent, “You have to be careful with your KPIs during Covid-19. Right now, some our forecast accuracy looks really amazing, but it’s really easy to get high forecast accuracy when you’re on allocation and you know exactly what you can sell! You have to go back a year prior to see what could have been sold, and use those findings to build the new business plan”.
“You have to be careful with your KPIs during Covid-19″
Of course, it’s not easy updating KPIs as market the environment changes. “Measuring S&OP is a tricky one”, says Cristian Circiumaru. “I have an S&OP scoreboard that I present monthly at the Executive S&OP meeting so all functions can see their own attendance and are held accountable. I have inventory min and max tracking for key materials as well as forecast accuracy, but not forecast bias at this point in time. Right now, making sure the right people are present at the S&OP meeting is the priority”. Having such KPIs established during normal market conditions is standard practice – having them in times like these is an absolute necessity.
As vaccines are rolled out globally and lockdowns restrictions ease, the end is in sight. But, as Wallace DeMent observes, the challenges are far from over, “We still have a lot pandemic to get through which means more data having to be cleansed at a later date. My fun has just begun.”