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Demand Planning - How to provide better input for Supply Chain PlanningIntroduction & Experience SharingDr. Eckart Dutz - General Director Cartridge World (VN)

Vietnam Supply Chain Community - Supply Chain Academy

January 15th, 2011

Agenda

Introduction

Demand Characteristics - Forecasting Methodology

Demand Planning Process

Experience Sharing

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Introduction & Case Study Background

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Desired Benefits of Demand Planning

Improved Customer Service through better Product Availability

Better Financial Performance

Lower inventory

Less write-offs

Fewer change-over and OT

Better Customer and Consumer Understanding

Improved Stakeholder Collaboration within SamCo

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Progress measured

by KPI !

Forecasting as Science

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6

Challenges for Demand Planning Process & Implementation

Summary of Participants

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Challenges for SamCo Demand Planning Process & Implementation

Mobilisation &

Communication

in the

Organisation Lack of DP

System

Skills &

Experience

(incl. Statistics)

Consumer &

Customer

Insights &

Information

No Category

Planning &

Value Targets

for Sales

Stages of Demand Plan Implementation

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Sales Target

Planning

Basic Demand Planning Process

Advanced Demand Planning Proces

Process &

Organisation

System &

Experience

No Consen-

sus,

limited

understanding

of Demand

Driver

Lack of

Experience

System, Skills

Level

Mis

sin

g

Demand Characteristics -Forecasting Methodology

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Demand Drivers

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Judgemental Factors

Time Series (Baseline)

Causal Factors

Competitor ActivitiesOverall Economic

DevelopmentDiscount

New Product Introduction

Category/Market Developement

Trade Promotions (Additional Displays)

Product Canibalisation

Overall Increase of Penetration

Brand Advertising (if large scale)

Specific Demand Factors as assessed by Field Sales

Brand and Product Loyalty

Seasonality

Product Sampling (if large Scale)

Overall Customer & Consumer Goodwill

Supply Constraints

SamCo - Demand Characteristics (1)

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Primary Sales for most channels (Distributor, Wholesale). No real Demand Signal available. Strongly impacted by:

Achievement of Sales Target (Push)

Financial constraints of Distributor/Wholesale

Market Assessment by Distributor & Field Sales

Note: CRM - Secondary Sales Data will strongly improve the quality of data - is yet fully implemented and needs to be interfaced to other IT system and made available for SBU / Marketing

SamCo - Demand Characteristics (2)

High Level of Fluctuations - Difficult to establish Baseline

Sales Push (see before)

High level on Sales Activities (mostly discount)

Out-of-Stock and Short-Capacity (Supply-side)

New Product Products - Low rate of success ?

Saisonal Products - Follow fairly predictable pattern

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Demand Planning Process

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Composition of a Consensus Demand Plan

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Judgemental Forecast

Analyze historical Sales and judge future Demand

Tme Series Forecast

Generate statistical Forecast based on historical Sales

Apply Promotions, Activities, season, etc

Causal Forecast

BaselineDemand

Plan

Consensus Forecast

Integrate Field Sales and

Distribution Partner

Factors considered in Consensus Demand Plan (Stage 1)

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Judgemental Forecast

Analysis & Sales Intelligence

Tme Series Forecast

TrendBias

ActivitiesSeasonality

Causal Forecast

BaselineDemand

Plan

Consensus Forecast

Integrate Field Sales and

Distribution Partner

Continuous Improvement in Demand Planning

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DemandPlanning

Loop

1. Estimate

2. Monitor

3. Analyze

Baseline & SeasonalityImpact of Sales ActivitiesNew Product Lauches

Actual Sales DevelopmentDeviiation from PlanValidation of assumptions

Forecast AccuracyDemand DriverFinancial Implications

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Finance

Marketing

Sales Mgmt.

Sales Reps

Supply Chain

CreateTargets

EstablishBaseline- Sales Rep (Bottom-up)- SC(Stat.)

New Product Forecast

PromoForecast

Review Against Product

Line Targets

Create Revenue Forecast

Revise P & L

Forecast

Revise Marketing Activities

Evaluate Forecast Roll-up

Adjust Supply Plan

Establish Consensus

Forecast

Prepare Consensus

Forecast

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Granularity of Demand PlanProduct

TimeArea

Day

Week

Month

Quarter

SKU

Packsize

Subbrand

Brand

Customer

Distributor Territory

Region

National

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Week 1 4 4 4

Week 2 4 4 4

Week 44 4 4 4

Demand Planning Process Flow

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Weekly Forecast Tracking Meeting

Monthly Forecast Meeting

Frozen Period = No Changes permitted

Weeks with Actual Sales

Demand Planning Project Flow

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Data Collection &

AnalysisPreparing Trial Forecast

Develop Demand

Planning Process

Forecasting

Methodology Basics

• Analyze 11 SKUs over 90 weeks

• Review Newly launched products (10)

• Time Series & Correlation Analysis

• Small Trial Forecast (7 SKUs)

• Planning Process• Planning Timeframe• Planning Input• Planning Output• Roles & Responsibilities• Meeting Structure

• Trend, Moving Average• Forecast Bias• Pattern for Sales &

Marketing Activities• Pattern for Seanality• Forecasting New Product

• 50 SKUs of 5 SBU• Weekly Forecasting

Tracking Meeting• Monthly Forecasting

Meeting• 2 Weeks ahead frozen• Target Forecast Accuracy

= 70%

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Demand Planning Input SourcesSales & Marketing Activation Plan: 3 month Rolling: 12 weeks, of which 2 are firmed up

Promotion, Discounts on Distributor, Wholesale and Retail level, Sampling, Display (provided by Marketing)

Marketing (Brand Manager), Sales (Trade Marketing, Sales Operation) - consolidated by Demand Planning

New Product Introduction & Delisting Plan: 6-12 months Rolling, 1 months firm

Marketing/SBU Head provide input, needs to be confirmed by Supply Chain, consolidated by Demand Planning

Weekly Forecast Tracking Meeting

Demand Planner, Sales (Coordinator), Marketing (Coordinator), Supply Planner

Objective: Discuss very short-term sales performance

Review recent week against Forecast and discuss performance (accuracy)

Discuss & Update week 3 and 4

Update and communicate Sales Activation plan

Discuss and agree on solving short-term Supply Issues (Inventory)

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Monthly Forecast Meeting

Demand Planner, Sales (Coordinator), Marketing (Coordinator), Supply Planner

Review previous month performance (accuracy) and discuss and agree on causes

Present and agree New Demand Plan - highlite and discuss changes against previous version

Update & Communicate Sales Activation and Marketing Activity Plan

Discuss and resolve short-term Supply Issues

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New Products

Key Input: Launch Estimates

Key Reference is Sales Volume of Similar Products

Line Extension vs Product Innovation (New to KD, New to Market)

Pipelining: Based on Distribution Targets

Review 8 - 12 weeks after launch whether repeated consumer purchases and re-adjust baseline

Once stable and established in the market - review product cannibilisation

After 6 months - Identify whether potentially needs to be delisted

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Challenges Ahead

Re-confirmation of Demand Planning Team

Sustainable results in Trial Forecasting

Build-up (statistical ) Expertise

Successful roll-out of CRM

Mindset and cultural changes

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Implementation Support ?