Demand Planning – Part II of IV in Supply Chain Resiliency
Demand Planning – Part II of IV in Supply Chain Resiliency
By Robert Benny & Missan Eido
The supply chain is made up of a sequence of highly interrelated, serial and parallel dependent activities. Demand planning has proven to be one of the more challenging areas to manage risk – not due to its technical issues – but rather due to the human complexity in the supply chain.
Demand planning challenges can be grouped into the following areas:
- lack of automated tools
- visibility issues
- lack of a solid and timely collaboration framework with customers
1) Lack of automated tools
This is a continuing and consistent issue raised by most organizations. While spreadsheets with complicated macro’s are great for small organizations seeking to put an initial plan together, they do not provide the breadth and depth for more mature organizations. These organizations are looking to gather large amounts of data from a variety of places and use complex algorithms and business analytics to predict not just demand, but the risk to that demand in order to get the best financial analysis of their future.
- What can systems do?
- What do people need to do to understand risk and plan mitigation?
Understanding and quantifying supply chain risks correctly in respect to time and geography is crucial to preparedness.
- Classify critical vulnerabilities, identify key emergency personnel, ascertain critical decision processes, analyze gaps, identify infrastructure and supply chain needs; and define communications requirements.
- Develop the strategy; construct the overall Business Continuity plan, involve the appropriate personnel to ensure their buy-in and commitment.
- Establish protocols for implementation, community involvement (Supplier-customer), communications, test exercises, audits, reviews, updates, and compliance.
This is a major issue with most corporations but with the proper tools and algorithms in combination with the information you will see below on visibility and customer collaboration, demand volatility may be appropriately smoothed. Factoring in risk management in the appropriate algorithms will create the basis for supply chain resiliency in demand planning.
- Impact of other vendors on customer demand changes
- Effect of unexpected external events on the demand
Clarity and visibility have a great deal to do with the above two items and clearly is dependent on the item below. However, another area that creates enhanced visibility is “the correct business analytics.” By that we mean not only business metrics, but near real-time analytics that not only measure key metrics and alert when certain parameters are met, but that visualize them in such a way as to turn those metrics into critical information for key decision making. This is where data mining, appropriate risk analysis, advanced predictive analytics and highly interactive visualization combine to create much-needed business clarity.
4. Lack of solid collaboration with customers
This is a huge area of opportunity and one that comes with significant issues and concerns.
First, how do you get customers to share all of the details and risks associated with their customers’ demand? This is not about purposeful misleading of suppliers, but rather limited sharing may occur due to contractual obligations, lack of base knowledge on their part, lack of appropriate information, the desire to hold back some information for supplier negotiation purposes and so on.
Second, sometimes customers are too involved in unusual events to maintain a balanced perspective which may result in a less than accurate view of the implications on the rest of the supply chain.
Third, oftentimes they lack the automated tools and capability to perform such analysis, and if they do, this may be a competitive advantage of which they are unwilling to share, especially with the perceived risks associated with this information.
Finally, since this information will have such a strong indication on the financial future of their corporation, they may place such strong restrictions on its use that it renders the information valueless. However, given all of these issues, pursuing a strong and collaborative relationship with your customers can provide huge benefits for your company in terms of forecast accuracy, inventory management and risk avoidance.
When reviewing the above it is clear that demand planning is fraught with obstacles and risks but the return for “getting it right” can be enormous. In order to be resilient in demand planning all of the above areas need to be addressed with appropriate risk management, strong data mining, proper business analytics and articulate communication using a standardized terminology.
It is not surprising that the loss of critical supply chain control and the failure to monitor threats and risks are universally considered among the top five most common business failures.
Mitigating the demand risk could be successfully based on a Predict, Plan, and Perform framework allowing for potential risks to be identified and classified based on likelihood and impact. This in turn will allow critical business decisions to be made and tested in anticipation of risks – and well before a crisis – insuring organizational readiness and significantly reducing the cost associated with surprise based reaction.
Predict: It is often the first foundational step that must be completed to assess and classify risks according to likelihood and impact, including the potential disruptions caused by the ripple effect across the supply chain. Predicting risks must involve critical suppliers, mainly single source and difficult to replace providers of specialized product and services.
It must also involve critical customers who may potentially cause significant impact on the business fundamentals and may require specific plans – including important transport networks – insuring that alternate routes are in place, available, tested, and usable quickly without detrimental financial, legal and regulatory implication.
It is equally important to involve people accountable for vital functions and processes as well as necessary employees responsible for critical functions, so they may contribute to the risk assessment and understand their roles and responsibility during a crisis.
Methods: Is monitoring systematic or manual? Is it comprehensive and sensitive enough to flag any potential disruptions? How well is social media monitored? Are records kept for review at a later date?
Frequency: How often are emerging threats monitored? How quickly can they be identified as threats and correlated to risk? Are there processes in place to reset post emerging threats contingencies?
Channels: What is monitored? Are all important enterprise systems, transactions, warnings, news, blogs, Email, phone communication patterns, social media, and social networks included in the monitoring?
Is notification protocol in place and tested? Was communication redundancy addressed?
Predetermine what to say, when to say it and how to deliver the message.
Do you have message system in place? Is it a two ways vs. broadcast?
Are messaging tree and message maps are current?
Next week in Part III: Sourcing
About Robert Benny
Robert Benny is a recognized leader in the supply chain management field with a proven track record in integrating IT Systems with Business Processes. He is currently the Associate Director of the Supply Chain Center of Excellence in the McCombs School of Business at the University of Texas.
His previous position was Director of Supply Chain Processes at AMD where he directed the Supply Chain Transformation Program and the Global Operations Program Management Office. His team focused on institutionalizing the sales and operations planning process, improving demand planning and reducing inventories.
Prior to that, he served as Director of Systems and Business Process Integration for Freescale / Motorola’s Semiconductor Group where he drove a cost effective implementations of ERP, Advanced Planning, Logistic, Customer Relationship and Quality systems across Motorola’s global semiconductor sector.
Robert started his career at IBM where his last assignment was Director of Technology Planning & Forecasting. During his tenure at IBM he directed the reengineering of the semiconductor planning process and implemented formal S&OP and Master Scheduling Processes with teams in North America, Asia and Europe
Robert has a BS from Rensselaer Polytechnic Institute, is a Project Management Master and has a Six Sigma Green Belt. Robert has lectured at the University of Texas at Austin and Texas A&M University. He has presented papers at various SAP conferences and at Supply Chain World.
About Missan Eido
Firestorm Principal Missan Eido is a seasoned Program Manager with an extensive track record of achieving excellent results through people and teams directing Global Transformation Programs. These Programs focus on Business Architecture redesign for resiliency, Business Continuity Planning, Supply Chain Management, Inventory Optimization and Lean Manufacturing Operations.
Missan is recognized for managing successful business assessment programs aimed at identifying process vulnerabilities and managing programs designed to mitigate risk and deliver improved cost and cycle time performance. His substantive work across a myriad of systems, business processes and global organizational cultures provides him with extensive insight into how any company can best avoid the five common business failures that are typically exposed during a crisis, disruption or disaster, and threaten an organization’s resiliency and overall value to stakeholders.
Firestorm’s work with major clients, which includes crisis management support at Virginia Tech, provides Missan with excellent insights into the importance of preparedness. Leveraging experience and knowledge that spans a broad spectrum, Missan speaks to the considerations an entity employs to build disaster ready people and disaster ready businesses as a part of its overall operations, financial and reputation risk management strategy. Audiences will learn the value of Firestorm’s Predict.Plan.Perform.® process to “keep disruptions from becoming disasters.”
Working for more than two decades in a variety of regional and global management roles allowed Missan to develop a deep understanding of the challenges associated with establishing durable business processes and controls that support overall preparedness.
Missan has published articles on Semiconductor Fabrication Planning and Dispatch, Co-authored a white page on Discrete Event Simulation in supply chain planning and inventory control and has spoken on panels in business and industry forums.
He received his Bachelor’s degree from the University of Beirut Lebanon and completed graduate work at California State University Fullerton. He is a certified Quality Assurance and Production and Inventory Control Professional.