This blog post will explore the process of how evolving the approach to incorporating external and internal factors that impact a supply chain can benefit a company’s demand plan, especially as uncertainty continues to increase
Right: Product, Place, Time and Quantity
The demand planning function is an integral part of the supply chain, providing a critical input on customer and consumer consumption. The ultimate goal is to best forecast the right product, in the right place, at the right time, and in the right quantity. With a reliable demand plan, different supply chain functions can then create action plans for their specific areas of expertise.
One of the key challenges in creating and managing a demand plan is forecast accuracy. Accuracy becomes important, as decisions and contingency plans are being made based on the demand plan. The best planners and analysts will consider multiple inputs and can be aided by advanced time series forecasting. Even with a wealth of quantitative and qualitative inputs, uncertainty exists from the time a plan is created until the point when an order is placed (or a consumer purchases a product). A demand planner will then look at historical performance and try to identify causes of patterns in how demand has actualized – explaining the peaks, valleys, wins, and opportunities. However, utilizing existing indicators and historical data, a planner is unlikely to uncover - necessitating the need for a broader set of inputs, as well as expanded analytical and modeling capabilities
Identify Relevant Stressors to Build Resilience
Internal and external forces impact, or stress, different groups across the supply chain. While there are a multitude of stressors, by identifying, categorizing, and prioritizing these stressors, companies can then start to assess the potential holistic impact – and from there assign action plans to survey the business impact. These are key inputs that should then be reflected and quantified within a demand plan. Focusing on evolved External Stressors (e.g. Economic and market conditions) and Internal Stressors (e.g. Strategic Alignment and Business Unit Objectives) to identify the most impactful stressors will help to provide more context and guidance, and ultimately less variability within a plan. A key example of this will be how COVID-19 has either spiked demand that can’t be repeated (paper towels and hand sanitizer), or how demand drops based on retail locations that have had intermittent closures. The end goal would be to incorporate this insight in a scalable manner, and integrate it into the planning process. With inputs prioritized, this can then be scaled using forecasting and advanced analytics modeling.
Another important factor is for all functions to operate on the same shared assumptions of what forces will impact the overall business. Expanding the portfolio of inputs and insight into the supply chain will require coordinated efforts on how this information is consumed. Oftentimes, alignment can be challenging in a strong hierarchical supply chain where functional area views/assumptions can appear more definitive; a lack of alignment can prove challenging at a time when demand signals are increasingly difficult to define. By evolving how stressors are managed and viewed, the supply chain and demand planning function will be able to react more effectively both in the current and in the future, building resiliency for the supply chain.
We're Here to Help
RCSG can help in prioritizing what stressors are relevant to the overall supply chain, with solutions tailored to individual companies. This approach has a holistic benefit, and can be directly applied to the demand planning process.