When I first joined APICS back in 1978, “Demand Planner” was a position that did not exist.
In fact, sales forecasting in our organisation, Red Tulip Chocolates, was undertaken by the planning department.
Order entry reported to sales, safety stock strategies were based the philosophy of always having a month’s worth of everything, with inventories in distribution centres being “managed” by individual state managers.
Sure, the marketing director would throw annual budgets at us once a year, but these were highly inaccurate and inflated.
They were designed more for obtaining funds for marketing and advertising than for satisfying customer service levels.
It wasn’t until 1985 when our IT manager and I (as Group Logistics Manager) attended the first Manufacturing Resource Planning (MRPII) 5 Day course in Melbourne, that we were introduced to the terms, “Demand Planner” and “Sales and Operations Planning” as key parts of the MRPII Philosophy.
The implementation of MRPII and Distribution Requirements Planning (DRP) within our group of companies, by then the Beatrice Confectionery Group, played a key part in the centralisation of our 8 confectionery businesses, 9 manufacturing plants and 5 distribution companies.
The results of implementing these computer based management systems achieved massive improvements in customer service levels and profits whilst at the same time reducing costs and inventory levels.
Around the same time, more major customers within the region started demanding better customer service levels, introducing heavy penalties for stopping the plant or running out of stock on the shelves.
However, manufacturing companies were already struggling to maintain inventories at satisfactory levels (one company I consulted with in China started out with a stock turn of one!), so throwing more stock at the problem was not a solution.
Initially, demand planners focused on better safety stock strategies using the “Simple Pareto”, then the “Complex Pareto” approaches.
Finally they began to use statistical approaches as a check against stock levels calculated by the above methods.
This improved customer service levels and stabilised the turbulence throughout the supply chain which allowed demand planners the time to focus on the sales forecasting process and better connectivity with key customers and distribution centres.
In 1988 when I first set up Heenan Consulting, there was only a handful of people with the title of “Demand Planner”.
These planners would have been working for some of the pioneers of MRPII like: Beatrice, Kraft, Holden’s Engine Company, Uncle Tobys, ICI, Sterling Pharmaceuticals or Sandoz.
Today, virtually all my clients have a demand management “person” or a whole function assisting the company with the sales forecasting process, system and associated areas of demand management.
Demand Planning is now a key part in the monthly S&OP cycle which consists of a serious of formal steps culminating in a senior management “sign off” for all familes on; demand, supply and inventory or backlog levels.
The S&OP process undertaken each month consists of the following series of events.
Demand Planning phase:
Actual sales data and information on new products are disseminated and updated sales forecasts for all products, 2-3 Fiscal years into the future, are circulated throughout the company.
Activities associated with this phase are usually co-coordinated by the demand planning person who assists marketing, sales and new product personnel in managing the forecasting system and being secretary at the various meetings. Forecast accuracy is a key measure in assessing the success of this process.
Operations Planning phase: This is where planning, purchasing, operations and /or manufacturing construct new plans to support customer demands.
Reconciliation and integration with other business plans:
This phase ensure that everyone in the organisation is working to the “same set of numbers”.
This step would include a reconciliation against financials and other high level plans and could include a “partnership” meeting whereby key managers meet and try and resolve as many issues as possible to improve the efficiency and effectiveness of the senior management S&OP meeting.
The final phase in the S&OP process would be a meeting of the CEO and his or her direct reports to ensure the plans in place for the next 2-3 Fiscal Years are valid.
Along with many testimonials on the internet outlining the amazing benefits of achieving world class performance in key processes such as sales forecasting, demand management and S&OP, there are now many excellence reference books and benchmark checklists.
Some of these can be found at: www.heenan.com.au or by contacting Phil at phil.heenan@bigpond.com
So what should you look for if you are about to hire a demand planner?
Clearly good numerical skills would be helpful but just as important would be people management skills.
Dealing with detailed sales people, project minded new product introduction managers, marketing and sales managers and directors and possibly key customers, requires confidence and good coordination, communication and meetings skills.
How do you know if you are doing a good job of demand planning?
Like any key process, performance measurement is critical in assessing where you stand in comparison with world class.
Customer service level (on a line item basis not aggregate volume) is one measure that may be used to test forecast accuracy, demand management processes, distribution performance and safety stock/lead time strategies.
Sales forecast accuracy measures are many and varied and beyond this article.
Education is a key in developing an effective demand planner and apics demand management and forecasting courses are consistently booked out.
The next public courses are scheduled for June 30, July 3, and August 15 through APICS (apicsevents@bigpond.com), however, courses may also be held at your own premises.
About the author:
Phil Heenan is one of the most experienced and successful consultants specialising in S&OP, MRPII and Lean principles.
He was one of the first people in Australia to achieve “Class A” in 1988 and since then has assisted many organisations to Class A results: improved customer service, lower inventories and costs, improved profits and return on total assets.
These results have been well publicised by many of his clients at conferences and through articles.
Heenan has held many positions within apics and will be presenting the results of the 2007 supply chain survey on supply chain practices at the APICS international conference to be held at the Gold Coast commencing on June 16.
www.apicsconference.com.au or: www.apics.org.au