Supply chain is complex, encompassing a broad range of functions, including supply planning and demand planning roles. It can be challenging to distinguish between these functions, leading to confusion among companies and hiring managers.
I recently had a discussion with a friend who is a leader in placing people in supply chain, demand planning, and S&OP roles. He shared with me how companies often misidentify their needs, using certain terms interchangeably, such as calling a Supply Planner a Demand Planner and vice versa. As an example, he mentioned a job description he received for a Demand Planner to manage materials for the manufacturing process, which should have been a supply planning role. This confusion in terminology can be perplexing.
Demand Planners and Supply Planners do have one thing in common, however, and that is working together in the S&OP process. I recently spoke to an S&OP expert on the IBF On Demand Podcast, Alina Davydova, who is Senior Manager SIOP at Danfoss to clear up some of the ambiguity around these terms. The below is taken from that conversation.
First of all, how do we define demand and supply planning?
It is important that we look at the S&OP process as a whole. Within operations, we know that there is a demand (sales) part and a supply part. When we understand that demand and supply planning are one body, we can start defining them individually.
Starting with demand, we are looking into the market needs and trying to understand what we are going to sell. Then, we transform that prediction of demand into what we can actually provide in the supplying part and how we can support sales. This is where the demand and supply functions meet, discuss, and contribute to the deployment plan at the end. This discussion has to be regular, ongoing, and looping into each other so that we are not splitting or separating demand and supply.
Does it matter what we call the different roles in supply chain?
Yes, because when it comes to roles and responsibilities within the organization, we need to be very clear who is facilitating the demand plan and who is then looking at the rough cut capacity plan, and making sure that we do the right estimation of what we can produce versus what we need to sell. And then, at the end of the day, who is reconciling and validating these numbers at the end? That would not be the same people who are creating the demand plan.
So when we are talking about creating the competencies within the organization, all of these roles need to be defined and designed: Demand Planner, Supply Planner, Demand Manager, S&OP Managers etc. These things are crucial to the effective operation of the business.
A lot of companies that have these different roles without a strong S&OP process operate in silos. How do we break down those silos and work together?
To avoid this we need to have the whole process under the umbrella of an S&OP Manager so there is one person who is plugged into every step of the process and can bring everyone together. He/she is not necessarily dealing with any particular element like the sales forecast, for example, but knows what the main highlights are, and brings it into the supply planning where this can be discussed and agreed upon. If there are any questions or contributions regarding the demand plan, they can be brought up in the next cycle.
The person leading S&OP and the end-to-end process is crucial. You need somebody who understands exactly when things have to happen and who is responsible for this or that input and making sure that it happens, being there at the executive meetings, and facilitating the executive handshake to get the right decisions at the right time and bringing them back into the organization.
There can be a lot of confusion if the job title doesn’t match the role. What advice would you give to hiring managers when hiring Demand or Supply Planners?
I would start by describing all the steps that have to be done by that person in the normal, regular S&OP process. We have the monthly cycle, we have certain things that have to be done: Market analysis, the statistical forecast adjustments, going into the supply capacity checks, the pre-S&OP meeting, the executive S&OP meeting. All these things and their constituent steps are very clear activities that come with the role. Prepare a simple roles and responsibilities matrix. Who does what? Who opens the tool? Who signs off approval for level A, level B and so on? Who needs to call for the meeting with the executives? This will become the outline for your job description. Depending on the specific activities, it will be clear whether it is a Demand Planner or Supply Planner you’re looking for.
The Bottom Line: Supply Planning Vs Demand Planning
When we talk about demand planning, that’s the prediction side of the equation. Demand Planners are responsible for compiling a demand forecast. Supply planning on the other hand, that’s the optimization side of the problem. Supply Planners are responsible for translating the demand plan into the most efficient and executable plan that meets demand.
The goal from a supply planning perspective is to minimize cost, increase service, maximize resources, and leverage inventory to reduce cash being tied up. So it’s really a cash/cost/service triangle that must be balanced in a manner that achieves the particular financial/customer service objectives set by the company, whatever those may be.
To learn the fundamentals of business forecasting and demand planning, join us for IBF’s Chicago Demand Planning & Forecasting Boot Camp from March 15-17, 2023. You’ll learn how to forecast demand and balance demand and supply from world-leading experts. Click here for more information.