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Consensus Demand Management – Team, Budget and Process

The Demand Team

The consensus demand management process can’t be carried out by a single person or function, the reason we call it a consensus demand plan is that several people and functions are involved, this team will then arrive at a consensus as to what the company can reasonably expect as far as demand is concerned.

In the past when the salesman got the forecast wrong, we tended to go down and ‘beat’ him, or her, and hope they did a better job next time. Bearing in mind that the first rule of forecasting is that it will always be wrong, the salesman were on a hiding to nothing and obviously were not seriously keen to partake in such a process. Now when the consensus demand plan is wrong, and it will be, we try and determine why we got it wrong, file that information away in our knowledge bank and try and improve the process for the next month.

So, who should be included on this demand team? Certainly, there needs to be representation from sales and marketing. New product development should also be there if the business is growing significantly in both products and markets. The master production scheduler should also be in attendance, the more they understand about the demand the better they will be able to plan the supply. Plus, anybody else in the business that has insight into what drives or affects the demand on the business. The financial manager’s attendance could be useful if Forex rates or commodity prices affect your business significantly. And, lastly don’t rule out an outside consultant that may have a better understanding of the markets in which you operate than you do.

Ultimately, this whole process should be pulled together and managed by a demand manger that reports to the sales and marketing department as they should ultimately own the consensus demand plan and be happy that it can be achieved.

The Demand Management Budget

This process requires a budget, what do you include and how much will it be? Well, it is not going to cost a fortune, but some money and resources will be required.

The first thing you don’t do is go out and buy the most expensive demand management software you can find; the chances are it will never be implemented because it is too complex and you haven’t developed a process yet. You must learn to walk before you can run.

Certainly, buy a simple statistical forecasting package, there are plenty around and they are relatively inexpensive. Learn how to use that first and get the best out of it before considering more sophisticated software that may provide you with some other benefits and functionality and there are some really good tools out there. So do not buy the Ferrari before you have learned how to drive the VW golf properly!

When budget is available the next requirement is to employ a Demand Manager who will orchestrate, develop and most of all continuously improve this process. Look for somebody who has certified qualifications in this area of business, admittedly not easy to find. Otherwise, make sure they gain their qualifications whilst in your employ.

Some companies try to combine the demand and supply (MPS) manager positions. This is not good practice, the poor incumbent will not know on which side of the business he/she is operating at any one time, demand or supply, and will probably do a halfhearted job on both sides of the fence. The requirements for both these functions are totally different and require different expertise.

The Demand Management Process

Demand management process, that you can build in your business, starts with the Demand Manager, if you have one, or the person currently fulfilling that role. Their first job is to download the latest sales history and append the data to the demand history file. The latest data then needs to be adjusted to reflect the true demand or flagged as an event if one had taken place that month.

The demand manager would then input the latest demand data in to your statistical forecasting system and literally seconds later can save the forecast output so the sales and marketing team can move into the next phase of the process, collaboration with the customer.

Most statistical forecasting systems will have the ability to adjust the forecasts in the system in collaboration with the customer. Now we all have limited time so we need to know where our time will yield the greatest benefit. Therefore, we should apply Pareto analysis and you should only collaborate on your forecast with regards to your top 20% of customers, or products, that provide 80% of your sales. So, armed with their laptops your salesman needs to visit customers and talk demand and adjust the forecasts in real-time based on their customer comments.

These collaborated forecasts are then fed back to the demand manager and it is time to call the consensus demand team together.

Presented By

Ken Titmuss

CFPIM, CSCP, SCOR-P, CPF, CS&OP, PLS, CDDP, CSCA, CDDL, CLTD, DDPP, DDLP, AEF, CSSC, CPIA Chief Executive Officer at Kent Outsourcing Services

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