As a trainer and advisor for IBF, I have worked for several amazing companies with talented people. As part of the 3-day training program we deliver, we always spend time thinking about the improvement areas that will help the team to implement demand planning best practices.
The Start/Stop/ Continue format is used. What will the company start doing? What will they stop doing? What will they continue and improve? For most groups in our training programs, this list comes readily and most people agree on what to change.
But then a funny thing happens. When we start to discuss how and when these changes can happen, the teams face a common challenge. Their resources are often spread amazingly thin, and therefore can’t devote the time to start working in a new area.
Even more frustrating, Demand Planners often do not feel they’re able to stop activities that take up precious time. Fortunately, there is a proven methodology we take from Operations used to improve focus, effectiveness and efficiency.
The Lean philosophy provides an approach to evaluating an operation to reduce waste, providing resources that can be applied to value added activities. The approach to Lean Demand Planning is fairly simple and we can adapt this methodology for the purpose of improvement and freeing up time. Here are the five steps:
1. Identify value
2. Map value stream
3. Create flow
4. Establish pull
5. Seek perfection
Step 1: Identify Value
In a traditional Lean approach, one focuses on the end customer. The key is to understand clearly what the customer values (i.e., what they will pay for) and what they will not. This helps
the organization to focus on what is important, and strip away work that is not important or just superfluous.
For demand planning, the customers are internal. And our internal customers want an accurate demand plan. Although that statement is true, it needs to be refined. There are different uses of forecasts, and different people need different forecasts. SKU level accuracy may be important for replenishment planning over the next 8 weeks, but, for capacity planning, we need accuracy at a more aggregate level, and for a much longer timeframe.
Beyond the core of forecast accuracy, it is the information that is generated through the demand planning process that should also be valued within the organization. Highlighting forecast variance from the plan and the reasons why is also important for making decisions. Other examples include analysis of new product sales performance to provide business insight to the organization.
Step 2: Map The Value Stream
In a typical Lean program, it is important to understand the process used to deliver a product to a customer. A visual map is used to mark each process step for a given scope, usually led by a Lean process expert with process participants. Other elements such as resources required,
waiting time, and hand-offs are added to the value stream map.
In many cases, after a current state map is developed, an ideal state or future state map is
also created to highlight areas of change. For demand planning processes, companies can use the same methodology. Instead of a product being delivered, it is information that is being shared.
For example, teams can review the information that is prepared for a consensus meeting, or how new product forecasts are developed. Each step can be documented, including handoffs, wait times, and resources needed. Some teams may need to perform simple time studies to see where the work hours are going. In larger projects, it may be helpful to create a value stream map of the entire monthly cycle for demand planning. Again, an ideal state or future state
can also be helpful. During this step, it is critical to see which steps are really adding value.
According to the Lean Enterprise Institute, these criteria truly add value if:
• The customer is willing to pay for it.
• The activity transforms a product or
service in some way.
• The activity is done correctly the first
These steps are important not only for Lean Supply Chain Planning but also for Lean demand planning.
Step 3: Create Flow
In the end, the value stream map is used to evaluate opportunities for improvement. This is known as creating flow. Non-value-added steps are identified and then removed. Processes that have bottlenecks are solved through improved processes and/or more resources. Continuous improvement projects and kaizen (improvement) events are used to streamline the process and get more output with less waste.
Using the value stream map to create better flow is essential in the demand planning world. Too often we implement a tool, setup a consensus meeting, and ask for reports, without having a good process to support these requirements. Demand Planners do their best to figure it out but can greatly benefit from the support of others.
In most cases, there are several quick wins that free up a Planner’s time, and other projects that spin off to gain even greater efficiency. Some specific ways to create better flow in demand planning are:
• Automate repetitive tasks. Data entry is often a key area of opportunity, as are accuracy metrics and other reports.
• Create standard work flows. For process steps like exception management,
forecast allocation, and others, best practices should be documented and
followed. Work flow tools can help to organize hand-offs between groups and further document time between steps.
• Clean up and organize data. Factories use “5S” principles to make tools and materials available for seamless operation. Demand Planners should make sure that data files are easy to access and are clean and up to date.
• Remove non-value-added steps. Every action should have a purpose. Lean promotes the ruthless pursuit to eliminate waste, and demand planning is no exception.
Step 4: Establish Pull
The idea of pull in the Lean philosophy is very simple. Operations should not spend time on activities that are not directly requested by the customer. Pull process for materials mean that
operations do not start until the need is signaled through a consumer shipment or material consumption in a factory.
Pull helps to avoid unnecessary work along the way, and also synchronizes activities whenever needed. In demand planning, we can apply this idea in a different way. Because demand planning is an analytical group with access to data, it is often called on to generate lots of reports and ad hoc analysis.
I recently advised a company where most of their time was spent publishing current month sales trends, which didn’t add any value to the core of demand planning. A simple solution is to take an inventory of reports and analysis done by a Planner. Some reports can be discontinued ASAP (one Demand Planner in my previous company produced a weekly report for a general manager that left the business years ago).
The best way is to ask our internal customers whether certain reports are needed. Per our Lean methodology, our work is adding value if the customer is willing to pay for it. This is the one way to assess whether to keep certain activities, discontinue them, or get budget for more staff.
Step 5: Seek Perfection
The final step in the Lean methodology is not the end of story, but rather just the beginning. Continuous improvement is at the heart of the Lean approach. Individuals and work teams are encouraged to improve well after the original value stream map has identified opportunities. Teams meet regularly to discuss progress and may often have specific kaizen events to focus on new areas of change.
For demand planning groups, this is absolutely critical to sustainable improvement. There are ways to improve statistical forecasting, gathering market intelligence, planning new products, managing consensus, and so on. Of course, the market is also changing, so our approach must adapt and improve to stay relevant. As managers, we need to instill the culture of continuous improvement in our teams. Planners who seek new approaches and challenge the status quo need to be recognized and rewarded. And managers need to free up some “thinking time” for our Planners, so they don’t get trapped in the habits of the monthly process.
The concept of Lean is not new; its roots are found in the operating systems of Toyota and other large manufacturers. These companies saw the need to eliminate waste and sustain reliable, and effective delivery while reducing the resources needed to provide them. Demand planning is an operational role, with core process steps and customers who expect services at the lowest cost. If we apply some of the concepts of Lean, we can meet our organizational needs and support our teams in the way they work.
John will be sharing further insight into forecasting and planning at IBF’s Business Forecasting, Planning & S&OP Conference in Orlando, held from October 19-22 at the Wyndham Orlando Resort. The biggest and best event of it’s kind, it’s your opportunity to learn best practices in S&OP, demand planning and forecasting, and network and socialize in a fantastic setting. See here for details.