Demand Planning: A Cornerstone of Every Business Plan
Businesses and their environment are growing more complex by the minute. Despite the many approaches, stakeholders, and circumstances around it, there is one invariable truth: serving customer demand is the reason for the existence of any firm.
In pursuit of better serving their customers, companies have adopted customer-centric management models that have served them well by increasing customer satisfaction and thus customer retention. But, these models also come with higher expectations. Now companies must live up to these new high standards, finding ways for achieving desired service levels in a cost-effective manner.
In addition to the pressure from customers and competitors, the outcome of the demand planning process has a high impact on many other planning areas across the board. This pressure has turned demand planning into a central process that sits at the core of the company’s planning activities and delivers key information to other processes and teams. Thus, it must be completed in a timely and precise manner to avoid delays or inaccuracies further down the line in activities such as labor and workforce planning, supply and procurement planning, or financial planning, being that they are all key to achieving higher quality across the firm.
In a nutshell, demand planning is central to the operations and management of any company. To confidently navigate today’s uncertain and volatile markets, planning should be able to cope with increasing complexity, growth, and volatility within the market and yet be done in a timely, transparent, comprehensive, and flexible fashion. So, if demand planning is such an important and challenging task, why are companies still doing it in spreadsheets or legacy tools? Could there be a better way? According to Gartner research, many businesses are struggling with this very concept:
Why Companies Struggle with Demand Planning
Companies are struggling to grasp the potential of supply chain planning because increasingly challenging business environments have made their processes and technology obsolete and less efficient. Planners and teams would need to dedicate more time (that they do not have) to complete their demand plans. And even if they did, how could they be sure that spending more time on their plans will translate to better outcomes? Would they put in place another spreadsheet to measure that? Demand planners' time needs to zero in on areas that need attention in order to mitigate risks and capitalize on opportunities. That can only be achieved with the right process and technology. Some factors that contribute to making demand planning challenging in this new reality include:
- Cross-functional collaboration
Demand planning is not the result of just demand analysis and statistical forecasting. It must also include, in a harmonious way, the point of view of the sales teams, the marketing team, and their promotions plan, as well as the mechanisms to correct the planners’ bias by reviewing the accuracy and value added from previous demand plans.
- Wide array of data sets
You not only need the historic demand data for different products and locations and/or customers to be used as a starting point for the forecast (which is a lot of data) but as mentioned early, you need the sales plan data, marketing plan data, and some external variables for more advanced demand forecasting such as the volume of sales orders to date or some environmental data.
- Flexibility and responsiveness
The market does not wait for your next planning cycle, and the COVID-19 burst is the best and most recent example. On top of the need to combine different teams and data sources, we need to be able to process all these inputs fast (and in a reliable and transparent way). This has to be done on-demand so we can keep our plans relevant as new events unfold. Just imagine how good your reaction would be to COVID-19 or any other disruption if you need almost three weeks to produce the monthly demand forecast, as was the case for one customer before using Anaplan. Just to put these three weeks into context, in that timeframe, the South of England went through Tier 2, Tier 3, Tier 4, and Tier 5 restrictions after a full lockdown.
More About Supply Chain Planning:
Plan in a New Way
Demand planning is growing in complexity and effort, encompassing key tasks such as analyzing data inputs, removing outliers, finding the right forecast algorithm for each product sales volume, seasonality, and variability, and analyzing the impact of promotions and other factors in your plans for all your products and customers quickly, in consensus, and in a controlled way.
But thanks to cloud and SaaS solutions, it is becoming easier to try new tools to have a sneak peek at the benefits that they could provide. There is a better alternative than growing your team (which makes collaboration harder) and working longer hours (to produce plans that are already obsolete by the time they are rolled out).
Anaplan is a cloud platform that was built to be fully collaborative, scalable, and to have high computing power. As a platform, Anaplan can tackle head-on all the demand planning mentioned above while easily connecting the demand planning solution with any other existing models in your workspace without disruption. Anaplan does not only provide the technology but thanks to the Partners Network and AppHub, from the business process perspective, Anaplan has you covered, too. If you are already using the Anaplan platform, you can go to Anaplan’s AppHub and download some demand planning apps for free, such as the “Demand Management” or “Monthly Statistical Forecasting Calculation Engine” apps. These apps will give you an out-of-the-box solution that already includes many demand planning processes and best practices so you do not need to spend time designing your own models up to the industry’s best practices. All you have to do is configure it with your company’s master data and feed it with your historical sales data to start your new demand planning journey. And in case you are not using Anaplan yet, don’t worry. Get in touch and we will be happy to schedule a session to discuss your situation, assess your business case, and take you through a live demo so you can see the value that Anaplan could bring to your organization.
Do you feel your company is missing the opportunity to leverage the power of demand planning? Leave a comment and let us know your thoughts!