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in Demand Planning , Uncategorized

Demand Planning: Admitting Mistakes

by Vanguard Software

Overcoming resistance to demand planning begins with acknowledging that mistakes have been made in the past. Rather than blame the software or the demand planning process itself, as is common across organizations, successful demand planning means accepting that the organization has failed to implement it properly in the past. That is, acknowledge that the organization made mistakes.

Exactly what mistakes have been made in the past will of course be different for each organization, but there are a number of very common errors that have soured the view of demand planning in many management teams:

Consensus planning Consensus planning alone is not a mistake. However, a failure to account for internal bias among the various internal organizations, let alone any errors each group could make, leads to distorted forecasts (errors within the demand planning process).
One-number forecasting One-number forecasting is popular with consultants, and sold to executives everywhere as some ultimate forecasting panacea. It has seen frequent adoption despite the idea that a one-number forecast must actually increase the likelihood of forecast error, rather than decrease it. One-number plans are simply too constraining for accurate forecasts. Instead, a broader examination through advanced forecasting technology provides a more accurate model.
Training Implementing demand planning systems and then failing to train staff how to maximize the effect of an improved forecasting signal may seem like an obvious error. Yet it is a mistake that has been repeated hundreds of times as organizations focus on the urgency of the results they seek, rather than the importance of the cause of those results.

 

Demand Planning: Process, Then Technology

The problems noted above are rooted in a lack of accountability. In each case, a mistake was made, which is hard to admit. However, no matter how evolved the demand planning system, without acknowledging these kinds of errors, they will simply be repeated. This is why so many organizations seem to struggle with effective demand planning.

Any implementation of a new demand planning system, or an improvement to existing systems, must begin with both an evaluation and acceptance of previous mistakes. Only by accepting that the organization itself, rather than the system, caused the problem, will effective demand planning systems be implemented successfully.

Demand Planning: A Practical Approach

Understanding the basic concept of demand planning is one thing: the practical implementation is something else. While demand planning as a concept has been recognized for years, the idea is often greeted with apprehension and even despair, often from a vague, and incorrect, idea of what it actually entails.

For many organizations, decades of technology refinement and process improvement have failed to eradicate demand management problems. The reality is, poorly implemented demand planning results in a substantial performance-to-satisfaction gap. This helps to explain the apprehension often observed when discussing it.

Since demand planning was first introduced as a concept in the early 1980s, supply chains have become increasingly complex. Today’s teams are faced with a much harder job than those at the inception of the idea. Part of the problem of demand planning today stems from this: while most companies recognize that the supply chain system is complex, they fail to fully understand the complexity itself. The modern supply chain includes a number of trade-offs, including growth, cycles, costs, and complexity.

Each unique supply chain must balance these pieces for the desired outcome. The biggest hurdle to successful demand management is simply failing to understand the effect of the trade-offs between factors within the supply chain. The practical implementation of successful demand planning requires teams to deal with mistakes so they do not repeat them.

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