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Route to Market & Supply Chain Blog

Top 10 Tips to Effective Demand Planning in S&OP

Posted by Dave Jordan on Wed, Jul 28, 2021

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In successful FMCG companies, Sales & Operational Planning (S&OP) is the flexible glue that holds numerous processes together ensuring demand and supply are balanced along the chain and most importantly, sees everyone operate to the same set of unambiguous sales, volume and financial numbers.

In the previous article we looked at the Top 10 elements necessary for a fully functioning S&OP process. Continuing the planning theme, this article discusses the detailed activities, processes and decisions required for an effective Demand Review meeting as part of that S&OP process.

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Top 10 Tips – Demand Review

  1. Demand Review Policy. Is there a written Forecasting & Demand Management Policy including a monthly Demand Review meeting covering the process, purpose, activities, responsibilities and expected results? Are participants willing and able to contribute and "silence indicates approval" is accepted? Is ownership of the policy clear and are routine reviews carried out?
  2. Demand Review Process & Procedures. Do tested and effective procedures exist to ensure that the Demand Review produces an unconstrained forecast? Does the statistical analysis consider past sales, events (e.g. spikes, campaigns or promotions), and routine seasonality? Is there a process for review and documentation of demand assumptions to help understand the business? Does this represent the basis for future demand projections?
  3. Forecast Control & Inputs. Are ALL forecasts managed and controlled centrally? Are inputs from Marketing, New Product Development (NPD), Commercial, Sales, Field Sales, Customer Service and Logistics included as per the key principle of "one set of numbers"? Are you sure there is no informal or “underground Excel” system in place?
  4. Trade Data Inputs. Does the demand planning process include consideration of point of sales data (POS) and/or sales out from distributors, wholesalers or retailers, as appropriate? Does a mechanism exist to ensure aggregate sales and demand plans agree with detailed sales plans?
  5. Forecast Hierarchy & Units of Measure. Is a Forecasting Hierarchy and Policy used to create and communicate plans to various levels within the business? Is the forecast level agreed within this hierarchy and aggregation/ disaggregation techniques used at other levels? Are units of measure consistent and appropriate for communicating the demand plans? Can volumetric and value-metric units be easily reconciled back to one another?
  6. Forecast Horizon. Has the forecast horizon has been agreed by all parties and considered within the forecast hierarchy? Are days, weeks, months, years used at different levels within the organisation according to needs?
  7. SKU Classification & Forecast Accuracy KPI. Is there a clear and widely agreed ABC process and classification of SKUs to provide priority for stock keeping and shortage management? Is the Forecast Accuracy KPI defined and tolerances clear in line with forecasting hierarchy, forecasting time fence and ABC classification? Is the KPI “honest” and meaningful?
  8. Demand Review Meeting. Do Sales and Marketing proactively participate in a meeting as the key input into the Demand Review Process? Is there a system in place to communicate NPD and competitive market intelligence as an input to the forecast?
  9. Sales Plan. Is there is a formal sales planning process in place covering all channels including exports? Are sales management and the sales force fully responsible and accept accountability, for executing the sales plan? Are the forecast and sales plan aligned and any differences fully understood and reconciled?
  10. Sales Incentive Schemes. Is the sales incentives scheme effective and avoids bias of the sales forecast or delivery of the sales plan? Do the incentives avert or at least minimise, a month-end sales peak or push?

Demand Planning is arguably the most important process within any FMCG company. Get this wrong and the problems and penalties start adding up and it is difficult to reverse. Get this right and you provide the foundation for market success.

Read more articles on Supply Chain Excellence and Route To Market on our website where you can also subscribe to our updates.

Finally, feel free to use any of our contact routes including Live Chat, if you have any questions about how the Enchange Supply Chain House can assist your journey to supply chain excellence.

 

 

Tags: Dave Jordan, Supply Chain, S&OP, Forecasting & Demand Planning, Supply Chain House

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