Balancing Demand and Supply with Effective Sales and Operations Planning One of the most common problems facing manufacturers across all industries is the difficulty of effectively balancing demand with supply.
Know key market trends and their impact on the quality of demand planning. Understand what drives leading-practice demand planning performance. Benchmark against key performance indicators of demand planning excellence.
With these three action-oriented steps, companies can assess their current demand planning performance and identify and focus on opportunities to improve overall supply chain planning performance.
Organizations are increasingly pursuing an integrated supply chain planning process that seeks a one-number view of future demand. Improved forecast accuracy continues to be an area of supply chain planning that companies feel offers the greatest opportunity for improvement.
The increase in customer expectations and requirements is creating new challenges and complexities for the demand planning process. Examples include shorter product lifecycles and compressed product launches, higher customer service levels, vendor-managed inventory, SKU proliferation, and irregular order patterns.
Organizations are increasing their use of real-time downstream data and demand-sensing technology and near-term information to refine short-term forecast by item and distribution center.
Understand what drives leading practice demand planning performance Our extensive experience helping clients improve their demand planning processes has yielded a key set of learnings and best practices.
In general, these learnings tend to be industry-agnostic and act as guidelines rather than hard rules. Nonetheless, as your organization looks to improve its demand planning process, these key best practices are an excellent place to start.
However, there are a critical few that virtually all leading organizations measure in some form. The weighted mean absolute percentage error is the single most critical KPI for the demand planning process.
If improved, it directly reduces supply chain volatility and inventory levels. It is a measure of the accuracy of the demand forecast produced compared to actuals.
There are varying schools of thought on the best way to measure forecast error. However, here are a few recommendations: Incorporate planned growth and future product mix changes in the network analysis to ensure more accurate results. Measure forecast error at the SKU level.
This fails to take into account mix, which can mask the effectiveness of your demand planning process and make your forecast appear more accurate than it really is.
Since many organizations still report WMAPE at the national level, the graphic below compares companies across various industries using this methodology.
Finished goods inventory turns. The more accurate a forecast is, the less safety stock an organization must carry to meet target customer service levels. A lean supply chain, driven by an effective demand planning process, will result in low average inventory levels and frequent turns.
Inventory obsolescence as a percentage of total inventory. While nonworking inventory is unavoidable, a high level of obsolete inventory indicates an inability to effectively plan future product demand.
However, organizations should ensure that they are balancing quality and operational efficiency.The literature on capacity management focuses on goods and manufacturing, and many writers assume that services are merely goods with a few odd characteristics.
Altering Demand. The manager can attempt to affect demand by developing off-peak pricing schemes, nonpeak promotions, complementary services, and reservation systems. Concept.
Analysing the firm's activities as a linked chain is a tried and tested way of revealing value creation opportunities. The business economist Michael Porter of Harvard Business School pioneered this value chain approach: "the value chain disaggregates the firm into its strategically relevant activities in order to understand the costs and existing potential sources of differentiation".
A business plan is a document that summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized. It is the road map to the success of your business. For anyone starting a business, it's a vital first step.
Get better visibility into your supply chain with QAD demand and supply chain planning solutions. Our solutions help drive margin, lower cost, and reduce lead times.
Inbound Logistics' glossary of transportation, logistics, supply chain, and international trade terms can help you navigate through confusion and get to the meaning behind industry jargon.