Demand Planning - How to provide better input for Supply Chain Planning Introduction & Experience Sharing
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1 1 Demand Planning - How to provide better input for Supply Chain Planning Introduction & Experience Sharing Dr. Eckart Dutz - General Director Cartridge World (VN) Vietnam Supply Chain Community - Supply Chain Academy January 15th, 2011
2 2 Agenda Introduction Demand Characteristics - ing Methodology Demand Planning Process Experience Sharing
3 3 Introduction & Case Study Background
4 4 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 Progress measured by KPI! Better Customer and Consumer Understanding Improved Stakeholder Collaboration within SamCo
5 ing as Science 5
6 6 Challenges for Demand Planning Process & Implementation Summary of Participants
7 7 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
8 8 Stages of Demand Plan Implementation System & Experience Level Process & Organisation Sales Target Planning Basic Demand Planning Process Advanced Demand Planning Proces Missing No Consensus, limited understanding of Demand Driver Lack of Experience System, Skills
9 9 Demand Characteristics - ing Methodology
10 10 Demand Drivers Judgemental Factors Competitor Activities New Product Introduction Product Canibalisation Specific Demand Factors as assessed by Field Sales Product Sampling (if large Scale) Supply Constraints Time Series (Baseline) Overall Economic Development Category/Market Developement Overall Increase of Penetration Brand and Product Loyalty Overall Customer & Consumer Goodwill Causal Factors Discount Trade Promotions (Additional Displays) Brand Advertising (if large scale) Seasonality
11 11 SamCo - Demand Characteristics (1) 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
12 12 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
13 Demand Planning Process 13
14 14 Composition of a Consensus Demand Plan Analyze historical Sales and judge future Demand Judgemental Generate statistical based on historical Sales Tme Series Baseline Demand Plan Consensus Integrate Field Sales and Distribution Partner Apply Promotions, Activities, season, etc Causal
15 15 Factors considered in Consensus Demand Plan (Stage 1) Analysis & Sales Intelligence Judgemental Trend Bias Tme Series Baseline Demand Plan Consensus Integrate Field Sales and Distribution Partner Activities Seasonality Causal
16 16 Continuous Improvement in Demand Planning Accuracy Demand Driver Financial Implications 3. Analyze Demand Planning 1. Estimate Baseline & Seasonality Impact of Sales Activities New Product Lauches Loop 2. Monitor Actual Sales Development Deviiation from Plan Validation of assumptions
17 17 Finance Marketing Create Targets New Product Review Against Product Line Targets Establish Consensus Create Revenue Revise Marketing Activities Revise P & L Sales Mgmt. Promo Evaluate Roll-up Sales Reps Supply Chain Establish Baseline - Sales Rep (Bottomup) - SC (Stat.) Prepare Consensus Adjust Supply Plan
18 18 Granularity of Demand Plan Product Brand Subbrand Packsize SKU National Customer Distributor Territory Region Day Week Month Quarter Area Time
19 Demand Planning Process Flow 19 Week Week Week Weekly Tracking Meeting 4 Monthly Meeting Frozen Period = No Changes permitted Weeks with Actual Sales
20 20 Demand Planning Project Flow Data Collection & Analysis Develop Demand Planning Process ing Methodology Basics Preparing Trial Analyze 11 SKUs over 90 weeks Review Newly launched products (10) Time Series & Correlation Analysis Small Trial (7 SKUs) Planning Process Planning Timeframe Planning Input Planning Output Roles & Responsibilities Meeting Structure Trend, Moving Average Bias Pattern for Sales & Marketing Activities Pattern for Seanality ing New Product 50 SKUs of 5 SBU Weekly ing Tracking Meeting Monthly ing Meeting 2 Weeks ahead frozen Target Accuracy = 70%
21 21 Demand Planning Input Sources Sales & 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
22 22 Weekly Tracking Meeting Demand Planner, Sales (Coordinator), Marketing (Coordinator), Supply Planner Objective: Discuss very short-term sales performance Review recent week against 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)
23 23 Monthly 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
24 24 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
25 25 Challenges Ahead Re-confirmation of Demand Planning Team Sustainable results in Trial ing Build-up (statistical ) Expertise Successful roll-out of CRM Implementation Support? Mindset and cultural changes
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