Supply Chain position descriptions don’t include responding to emergency calls.
There’s no call to go running off into a burning building to save the day.
But that’s what a supply chain role can feel like when things don’t go to plan.
On those days you become a fire fighter, and that burning building is the one you’re in.
It’s up to you to pull the supply chain control levers to maintain alignment between plan and actual.
Having set the plan, you need to call issues early, make corrections, and not be the fire-fighter.
You know the benefits that flow from improving your demand plan. As your demand planning improves everything else starts falling into place.
Sure, uncontrollable events come along. But when the demand plan is sound, the emergencies are less. Your supply plan will be right. The right quantity of the right things in the right place at the right time. Your customers will be happy, your Manager will be happy. You’ll be happy!
Here’s 10 ways to avoid demand planning emergencies that your Manager thinks you’ve already got in place…
Sound forecasts at the SKU level is your goal.
Do you know which SKU level forecasts are sound and which are running away from you?
A deteriorating trend signals troubled inventory-times ahead – too much, or too little. An improving trend means you’ll achieve targeted inventory levels. You’ll have the opportunity to reduce safety stock.
But before you do, ask yourself;
Some Sales Accounts may be outperforming others pulling the result up. Could poor results in one account signal a potential problem for the good performers?
You’ll deliver a stronger SKU level result when Sales Accounts are improving together.
Your ability to react to sudden swings in demand depends on a SKU’s own situation.
Capacity constraints and replenishment lead time can impact on your ability to react.
A short supply chain makes life easier. Having sprint capacity, available materials and customer close by all help. But reacting to sudden changes can hit delays.
You need to pay closer attention to forecast accuracy for those SKU’s.
Your inventory investment is higher here and this is where your biggest savings lie.
It’s not enough to segment your SKU’s based on the standard Pareto ABC approach of their sales volume – from high demand to low demand.
You’re missing vital insight in the form of uncertainty.
This is the fluctuation in the rate of consumption – the XYZ – from predictable demand to unpredictable demand.
For example, three SKU’s might all be A class SKU’s representing your strongest sellers. But you know that they don’t have the same rate of sales.
One has predictable, flat demand.
One is less stable, but still predictable.
…while the last one is out of control and unpredictable.
You know you can’t treat these the same way.
Using ABC/XYZ drives you to focus on the forecast accuracy of those SKU’s with the potential to impact you the most.
New SKU’s need to be ‘nursed’ through their early days until they’re ‘old enough’ to look after themselves. You need to keep a close eye on them.
Enthusiasm for the success of the new SKU’s is always high and is often mirrored in the initial forecast. But some new SKU’s thrive, while others take a nose dive.
The Sales Team might not share that initial enthusiasm.
Consumers might not make repeat purchases. Chances are you’ve unique materials going into the new SKU. You won’t want to have excess inventory if the new SKU is short-lived.
On the flip side, the new SKU could take off! You won’t want to be explaining that you missed the early signals.
You know your quantitative forecast system can’t do everything. It is only half the forecast. You need to include qualitative changes.
What about leading indicators – a guide for your sales?
e.g. a forecast for drought when you supply agricultural industry herbicides. When drought hits, your customers have more dirt than grass beneath their feet. Sales won’t meet last season’s volume. You need to intervene (on the qualitative side) and adjust a quantitative forecast. The quantitative forecast will assume the weather’s constant.
Substitute the weather with anything that can affect your demand;
raw material shortage,
the cannibalisation effect of a new SKU,
legal changes impacting the market,
competitor promotions,
a competitor’s innovation or an innovation of your own.
Neither AI nor the big black forecasting box can see the things you can.
When you balance the quantitative forecast with qualitative input, you’re making assumptions. You need to re-visit those assumptions each month at least.
You need to make sure that they still make sense.
The answers to these questions will prove more valuable than any black-box algorithm.
You can’t set and forget your assumptions.
Ok, you’ve now combined your quantitative and qualitative inputs. The individual-SKU level forecasts can appear to be fine. It’s vital to step back and take a critical helicopter-view of your forecasts;
You need to cross check the family-level forecasts with history and the budget.
There’s always too much on your ‘To-Do’ list to spend time reviewing every SKU in your Demand Plan. You’ve got to take a targeted approach.
Within the full list of SKU’s there’s a selection you need to focus on. Those are the SKU’s to watch and act on.
You want to concentrate on those SKU’s that fall outside their target bands based on:
You don’t have the time to ‘boil the ocean’ by trying to review every single SKU in the product range.
New business opportunities come in from the Marketing team adding to the new product development (NPD) pipeline. If judged as worthy, they’ll need to go into to the forecast.
As a forecast, they’re still a plan for Sales and Marketing, but they’re your new reality.
They’re calling upon your production capacity and warehouse space. If you’ve not enough of these then you’ve started increasing that capacity or making commitments to outsource.
Based on material lead times you may need to buy new materials or commit to additional volumes. You may need to take on new suppliers to support the NPD pipeline.
Before a single unit of an NPD SKU is made, you’re incurring costs to meet that NPD.
Your task is to re-visit them with the Marketing Team to keep them valid. Should those forecasts be higher, or lower, or even be there at all?
If you’ve a gap in your supply history as a result of an out-of-stock situation you don’t want to plan for a repeat by carrying that forward as sales history.
You want to ensure your forecast system/demand planning process takes account of the sales you missed and includes it in your Demand Plan.
If the forecast only looks at sales history the supply gap will become part of the statistical forecast for the same period in the future.
Does your demand planning system account for the unfulfilled demand of the past?
You didn’t sign up to be a firefighter. You want to avoid those times you must fulfil that role.
Demand Planning is often held as the ultimate source of disruptive controllable events.
This list is far from exhaustive and no doubt you’re already doing everything listed above.
But ask yourself.
If you feel you need to address any of these, then today’s the day.
…after all, if you’ve found and read this post, who’s to say your manager won’t find and read it tomorrow?
Struggling to get everyone’s engagement in your S&OP process? Use this as an example of…
Is ExxonMobil on the verge of becoming the next Kodak, clinging to outdated models while…
Is your supply chain hiding a dark secret? Modern slavery impacts millions globally. This article…
A story of two gardeners, Thomas and Stanley, who illustrate the differences between tactical and…
By actively engaging with Scope 3 reporting, a supply chain department can increase brand reputation…
Discover five powerful strategies for thriving in the FMCG market. Learn how to optimise your…