How to Leverage Forecasting and a Demand Control … to Leverage Forecasting and a Demand Control...

How to Leverage Forecasting

and a Demand Control Process

to Improve Customer Service

© Oliver Wight International

Poor On-time Delivery

Performance

Allocation

Missed customer deliveries

Loss of credibility with

customers

Lost customers

Expediting

Premium transportation costs

Flexibility / responsiveness low

Higher working capital in

inventory

Late new product introductions

Symptoms of poor Customer Service

© Oliver Wight International 2

These common problems

cause us to live in the short

term.

Ironically, long term planning

is the solution to solving

many of them.

Today, we will explore why

long term planning is

essential and how we

leverage Demand Control to

accomplish this.

Demand Control is part of Demand Management

Demand Management

Demand Planning Demand Control

Planning all demands for products

and services to support the

marketplace

Involve all functional areas that

plan and execute demand-creating

activities

Communicate the demand plan to

those who need to know in order

to perform their responsibilities

Doing what is required to help

make the demand happen

Prioritizing demand when supply is

lacking

Encompasses order entry, order

promising and prioritization

Measuring execution to better

align plans and actions


Best Practice Principle when Reality is

Different than Planned The Challenges


Time

FIRM ZONE TRADING ZONE FUTURE PLANNING ZONE

Material

Purchased,

Capacity

Committed,

Production

Sequenced & being

Executed; and

other

Value Added

$$$ Cost

Material Ordered

Capacity validated

Resources assigned

Commitment to Schedule

$$ Cost

Flexible Plans for Demand

& Supply

Few Specific Commitments

Changes expected

$ or Zero Cost

DECISION POINT DECISION POINT

PLANNING TIME FENCE

Manage Demand

To Match Supply

Manage Supply To

Match Demand

FIRM TRADING PLAN

01 02 03 04 05 06 07 08 09 10 11 12 M4 M5 M18

The ‘Focus Period’ Ensuring Smooth Transition


MONTHLY

SUPPLY PLAN

WEEKLY

MASTER

SUPPLY

SCHEDULE

Cumulative Lead Time

Focus Month Critical Resource

Network Planning

Master Supply Scheduler covers

Critical Materials and Capacity

Capacity

Planners

Schedule

and Release

Fo

cu

s M

on

th

Best Practice


Free Change Zone

Few or No

Commitments Made

$ or Zero Cost

Time

Manage Demand to Match Supply Manage Supply to Match Demand

24-Month Demand Plan

Firm Zone

Material Purchased

and Value Added

$$$ Cost

Commit Zone

Material Commitments

Have Been Made

$$ Cost

We must do both!

Short term variances can distract

us from long term planning Lack of long term planning

exacerbates short term variances

Firm Zone

Material Purchased

and Value Added

$$$ Cost

Commit Zone


Have Been Made

$$ Cost

Demand Control Consists

of a Decision-Making Process


Who Makes the Decision

When Demand Is Greater

than Planned? (or Supply is

Less than planned)

Who Decides Course

of Action When Demand

Is Less than Planned? (or Supply

is Greater than planned)

7

Demand Plan

Demand Plan

Process Flow for when Demand is

different Than Planned (Case Example)


Key Integration

Point Sales Prioritizes

When Actual

Demand Is Greater

Than the Demand

Plan

Prioritization

Required

Order

Booked

and

Promised Demand Plan Abnormal Demand

Identified or Imbalance in

Demand/Supply Identified

Customer Service or Demand Controller

Requirements Reviewed & Options

Presented If Necessary

Supply Manager

Order Prioritization and Acceptance

Customer Services Facilitates Review By

Sales and Communicates

Decision

Demand Controller

Prioritization Decision

Sales Management

Prioritization Not

Required

Definition of “Abnormal” Demand Needs

to Be Agreed Upon.


Abnormal Demand Is Any

Demand that Is Not Part of the

Demand Plan, Typically Large.

Company needs to have:

Procedure that states the process

and mechanism for identifying

Policy for dealing with abnormal

demands in providing service

to customers

9

Should Your Best Customers Suffer Because Business Is Good?

How Is Abnormal Demand Identified?

(Demand Not Planned)

New customer

Demand

Controller

New ship-to location

Significant quantity for that item

Significant quantity for that customer

Cumulative

Customer

Orders

Abnormal Demand Can Occur as a

Single Event or Can Be Cumulative.

Need Method to Code and Track. Keep it Simple!


What Happens When a Formal Demand Control

Process Does Not Exist . . .


Everyone is the “Demand Controller”

Live in the “weeds”

No time to plan demand and think strategically

Demand Planning Insights and the

role of Long Term Planning in a

Demand Control Process

Demand Control focus is Near Term

-1 -2 -3

25 % 75% Demand / Supply/

Product Management DEMAND CONTROL

75% 10% 15% IBP

Horizon (Months)

Weekly Review

Month / Period Review

1 4 24 2 3


Consensus Demand Plan

What if anticipated demand develops less than planned?

What if anticipated demand develops greater than planned?

Scenario Planning . . . What If?

Inventory or potential

waste will surge to

1.4M units

We will run out of

product in 6 months


We will run out of

product in 6 months

• The impacts of normal short term variances in demand and

supply are greatly exaggerated due to our failure to

anticipate this scenario.

• Do we even know the contribution to lack of longer demand

planning accuracy on our short term planning phase?

• What declines in customer service rates could have been

avoided by better long term planning?

Scenario Planning . . . What If?

16 © Oliver Wight International

What Drives Demand Plan Inaccuracies?

The underlying assumptions

about the business are what

prove to be wrong.

Demand plan numbers

are not wrong; they tend

to be inaccurate.



Forecast Pro Example

showing Assumption

Tracking

Best Practice: Multiple Views of Demand Statistical Analysis

Marketing/

Brand Input

Customer Input

Product Portfolio

Input

Statistical

Analysis

Sales Input

Business Plan

& Strategy

Demand

Plan

Statistical Forecast

Detailed Review & Analysis

Frame of Reference

Planning Horizon 1-12+Months

Software Supported



INSERT FORECAST PRO

EXAMPLE OF

STATISTICAL FORECAST


INSERT FORECAST PRO

EXAMPLE OF TRACKING

MULTIPLE VIEWS USING

REFERENCE

FORECASTS.

Time Zones Can Be Misinterpreted Firm Does Not Mean Frozen


Firm Zone

Material Purchased

and Value Added

$$$ Cost

Commit Zone


Have Been Made

$$ Cost

Free Change Zone

Few or No

Commitments Made

$ or Zero Cost

Time

Manage Demand to Match Supply Manage Supply to Match Demand

Demand Control

Manager Role

S&OP/IBP

Process

Questions?

Some Common Questions

Are we missing orders, increasing inventory or both? Are your best customers suffering?

Q

A

How do I know whether this process is right for my organization?

Q I run a lean organization – are we are adding a lot more people in this process?

A

No. A Demand Control process leverages those who are largely already involved in day to day ‘firefighting’

and helps define their roles that lead to improved communication and timely decision making.


Why we do it

You are very busy . . . the day

flies by.

No two solutions to the crisis are

alike . . . There is a lot of variety

You are indispensible

You have saved the day

You feel very valuable

Why we shouldn’t

You work very long hours

Sometimes you fail and it is very

painful and visible when you do

You are on an emotional roller

coaster

Too much “tribal knowledge”

means you can never go on

vacation without interruption

The business is afraid to

promote you.

Eventually you are type-cast as

only a problem solver and not a

strategic thinker.

Living in the Weeds Barriers to Overcoming


Date post:	10-May-2018
Category:	Documents
Upload:	hoangxuyen
View:	223 times
Download:	2 times

How to Leverage Forecasting and a Demand Control … to Leverage Forecasting and a Demand Control...

Documents