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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
2
Introduction & Case Study Background
3
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
4
Progress measured
by KPI !
Forecasting as Science
5
6
Challenges for Demand Planning Process & Implementation
Summary of Participants
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
Stages of Demand Plan Implementation
8
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
9
Demand Drivers
10
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)
11
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
12
Demand Planning Process
13
Composition of a Consensus Demand Plan
14
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)
15
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
16
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
17
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
18
Granularity of Demand PlanProduct
TimeArea
Day
Week
Month
Quarter
SKU
Packsize
Subbrand
Brand
Customer
Distributor Territory
Region
National
19
Week 1 4 4 4
Week 2 4 4 4
Week 44 4 4 4
Demand Planning Process Flow
4
Weekly Forecast Tracking Meeting
Monthly Forecast Meeting
Frozen Period = No Changes permitted
Weeks with Actual Sales
Demand Planning Project Flow
20
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%
21
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)
22
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
23
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
24
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
25
Implementation Support ?