Single Line of Sight: Plan, Perform, Profit

The 5 Keys to Demand Planning Success

April 29, 2014

© 2014 Steelwedge Software, Inc. Confidential. 1

 Today’s Presenter

Background
Doug Dedman brings more than 20 years of services, operations, supply chain
planning and S&OP expertise to Steelwedge. Prior to joining Steelwedge, Doug spent
18 years at DBM Systems.
Doug Dedman
VP, Global Services While there, he was responsible for the development and growth of a global Sales and
Steelwedge Software Inc. Operations Planning (S&OP) consulting practice that specialized in helping
3825 Hopyard Rd
multinational corporations develop effective executive S&OP processes. He also held
Pleasanton, CA 94588 roles in General Management, Program Management and operations and supply
chain consulting.
Tel : (949) 460-1700
ddedman@steelwedge.com
Doug has also served in the role of Senior Director Customer Management at
Steelwedge, with responsibility for executive sponsorship and overall customer
satisfaction and project quality. He holds a bachelor of arts in Honors Economics from
the University of Waterloo as well as an MBA from the Odette School of Business.

© 2014 Steelwedge Software, Inc. Confidential. 2

Agenda

Introduction

Separating Demand by Demand Type

Ensuring Accountability For Demand Plan

Prudent Use of Statistical Forecasting

Collaboration

Real Time Visibility Across Business

Summary and QA

© 2014 Steelwedge Software, Inc. Confidential. 3

What is the purpose of Demand Planning?

• Input into developing a Financial Forecast

• Develop an unconstrained market driven Booking and
Shipment Plan
• Set targets to meet market expectations
• lead time, product offering, pricing, service etc.
• Set targets for operational buffers
• Backlog and Finished Goods Inventory
• Input and Output of S&OP process
• Constrain or increase the Demand Plan based on S&OP
feedback (supply plan) – shape demand

© 2014 Steelwedge Software, Inc. Confidential. 4

What are the Keys to Demand Planning Success?

1. Separating Demand by Demand type

2. Ensuring Accountability for Demand Plan
3. Use Statistical Forecasts where appropriate
4. Collaborate to develop the Demand Plan
5. Real time visibility across business

© 2014 Steelwedge Software, Inc. Confidential. 5

Demand Streams

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Demand Streams

• Break the Demand Plan into streams

based on:
• Demand characteristics
• Accountability

Purpose
To better understand your demand

Result
Improve the accuracy of your future plans

© 2014 Steelwedge Software, Inc. Confidential. 7

Demand Streams

• Typical breakdowns:
• Region (Geography)
• Normal vs. Abnormal Demand (Flow vs. Project)
• Distribution Centre vs. Direct
• Large Customer(s) versus Small Customers

© 2014 Steelwedge Software, Inc. Confidential. 8

Demand Streams

• Demand characteristics may be different by stream

• Seasonality and/or Order Cycles
• Normal vs. Abnormal Demand
• Intelligent Demand
• Major Customer
• Product mix may be different by demand stream
• Specific items for specific customers
• Demand Planning tools should support:
• Bringing demand streams in from different sources: CRM, Customer
Collaboration, MRO demand
• Support accuracy measurement by stream
• Support collaboration and consollidation

© 2014 Steelwedge Software, Inc. Confidential. 9

Opportunity Pipeline for S&OP Planning

Insert SPB screenshots here

Opportunity Pipeline via
Sales Pipeline Bridge
on

Link to
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ESOP
2.42 Acct Mgr RE Laptops Max Stores-M
Opportunity Pipeline Detail

Opportunity Pipeline via

Sales Pipeline Bridge
on

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 Confirmed S&OP Sales Plan

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Consolidating Demand Streams

Sum up the demand stream plans for the Executive Meeting

CRM CRM CRM
Flow Demand Flow Demand Flow Demand
(Region 1) (Region 2) (Region 3)
Detail
Level for
Demand
Demand Plan Demand Plan Demand Plan Cycle
(Region 1) (Region 2) (Region 3)
MU - Spain MU - Turkey MU - UK

Consolidated Demand Plan

(Center Node) Detail
(ENPE)
Level for
Executive
5-Section Sheet Meeting
(Center Node)
(ENPE)

© 2014 Steelwedge Software, Inc. Confidential. 13

Demand Streams

• Breaking out demand streams allows better

management of the demand plan
• Statistical forecast where applicable
• Intelligent schedules where applicable
• CRM based project forecasts where applicable

• Breaking out demand streams allows you to assign

accountability
• It won’t improve unless a specific person is responsible and
accountable
• Measure accuracy at this level in the demand cycle of S&OP

© 2014 Steelwedge Software, Inc. Confidential. 14

Holding Accountability to Demand Plan

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A Common Organizational Challenge!

In Order to improve Demand Planning, I need

to hold someone accountable for the demand
plan!

Why is this so difficult?

© 2014 Steelwedge Software, Inc. Confidential. 16
Accountability

• Need to measure demand plan on something that is not a shared result:

• Bookings - Output of Sales/Marketing (Demand Side)
• Shipments – Result of demand (orders) and supply (inventory, production)
• Need to measure at a level of responsibility
• Region
• Customer
• Distribution/Direct
• Breaking out demand streams allows you to assign accountability
• It won’t improve unless a specific person is responsible and accountable
• Measure accuracy at this level in the demand cycle of S&OP

© 2014 Steelwedge Software, Inc. Confidential. 17

Accountability Includes Measurement of Change

What is the impact of

downturn in demand
one month out?
• Need ability to see change in plan (month over month)
• Drill down as required to see what caused change:
• product/customer/demand planning role
• Accountability not only includes accuracy but net change
• Tie measurement back to supply capability

© 2014 Steelwedge Software, Inc. Confidential. 18

Example Customer: Program Objectives and Deliverables

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Example Customer: Quantitative Assessment

Target Savings: $5M - $10M per $1B in revenue

Inventory Reduction
10-20% reduction through more accurate demand plan
Customer Satisfaction
10-30% improvement in customer satisfaction through reduced stock-outs
Demand Plan Accuracy
15-30% improvement through collaboration
Planning Cycle Time
50-70% reduction via integration and process automation
Revenue and Margins
5% lift through reduced stock-outs and better cost management

© 2014 Steelwedge Software, Inc. Confidential. 20

Use Statistical Forecast to Improve Demand

© 2014 Steelwedge Software, Inc. Confidential. 21

Normal Vs. Abnormal Demand

• Normal Demand – past performance (mix and volume) is a good

indicator of Future Forecast - FLOW
• Statistical forecast based on history
• Modified by future plans – promotion, price change, new markets
• Abnormal Demand – a single transaction drives a significant
portion of business - PROJECT
• Past sales are not an indication of future sales – lumpy demand
– Forecast on a case by case basis
– Use an Opportunity Management Process - CRM
• Historical mix ratios will not apply
• May include more than one product family
“Manage” the Projects - “Forecast” the Flow.
© 2014 Steelwedge Software, Inc. Confidential. 22
Normal Vs. Abnormal Demand

• Types:
• Flow vs. Project
• MRO vs. Project
• Flow vs. New Distribution Center
• Domestic vs. Large Export
• Regular vs. Lumpy
• Trying to statistically forecast the right hand side is
extremely difficult and may give misleading results
• Break the demand planning into the different inputs and run
forecast against items on the left
Keep in Mind: You will most likely have different
fulfillment strategies based on the type of demand.

© 2014 Steelwedge Software, Inc. Confidential. 23

Identifying Abnormal Demand

• Determine the “size” of

opportunity that is abnormal
• Evaluate historical bookings to
determine order size relative to
volume
• Find the balance between:
– Number of opportunities
– Large opportunities that upset
the normal supply flow

If in doubt, pick a lower

number of opportunities
to manage.

© 2014 Steelwedge Software, Inc. Confidential. 24

Statistical Forecast Analysis
• Understand the quality of the demand data, i.e. active periods, sparse, etc.
• Generate multiple hierarchy level forecasts and analyze results
• Understand the forecast error by levels, i.e. MAPE and Weighted MAPE
• Assess the forecast growth and inflation
• Recommend the optimal forecast level

© 2014 Steelwedge Software, Inc. Confidential. 25

Product Segmentation Analysis – Demand Policy
Take the efficient approach - Understand complexity and its impacts

Statistical Collab &

Forecast Exception
Impact

Stocking Strategy: Min/Max, Safety

Stock, etc

Volatility
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Demand Policy

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Collaboration

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Why Collaboration?
Strategic Plan

Three to five year

strategic plan for the
family. Typically
updated annually

Demand Planning is an Integral 12 month or more, rolling plan

from the family. Updated monthly

Part of S&OP.
S&OP
S&OP

12 month or more, rolling demand

plan for the family. Updated
monthly
Master
Demand Plan
Schedule

Detailed schedule for specific items

in the family. Authorized by the
S&OP production plan. Typically
Production and updated daily or weekly.
Material Plan

Detailed production and material

plans linked directly to the master
schedule.

S&OP is a collaborative process to

arrive at a balanced demand and
supply plan.

Using collaboration to arrive at

Demand Planning provides a better
signal to the S&OP/IBP process

© 2014 Steelwedge Software, Inc. Confidential. 29

Why Collaboration is important?

• Demand Planning is about predicting future results.

• Because we are dealing with the future, by definition we will be wrong!
• You want to use the best information possible to develop the demand
plan – pull in from multiple sources.
• Examples of Collaboration
• Customer Collaboration
• Partner Collaboration
• Internal Collaboration
– Multi-level demand plan
– Vertical integration

© 2014 Steelwedge Software, Inc. Confidential. 30

Collaborative Business Planning Process
GoPro S&OP Sales Demand Planning
Executive S&OP
S&OP S&OP
Marketing Marketing Sales Ops
New Product Forecasting
Forecast Collaboration

Demand SOFE
Forecast Performance
Planning
Historical Current Plan
Account Demand
Manager Analysis Finance

Sales Waterfall
Sales Manager
Management Forecast
KPI Dashboard

Demand Collaboration
Sales/Ops
Forecast

Consensus Exec Locked

S&OP Consensus
Consensus
Transaction Forecast
Files Forecast

Inputs Planning Processes

Inputs & Outputs
Sales Orders Locked
Account Sales Territory Demand Consensus
Master Data Consensus
Forecast Forecast Review Forecast
Customer Data Forecast

© 2014 Steelwedge Software, Inc. Confidential. 31

Screen Shots – Account Manager

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Screen Shots – Sales Manager

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Screen Shots – Sales Ops

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Screen Shots – S&OP

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Real Time Visibility Across Business

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Real Time Visibility Across the Business

• Demand Planning is one key input to S&OP Process.

• Needs to support an S&OP process that is:
• Run on a regular monthly cadence
• Establishing clear accountability for all plans (demand and supply)
• Looking at business by product family – across demand and supply
• Link demand plans and supply constraints
• A learning process – monthly feedback and continuous improvement
• Include Key Business Levers
– Bookings, Backlog, Shipments, Inventory, Supply (Production)
• Supported by common definitions across the business

© 2014 Steelwedge Software, Inc. Confidential. 37

Best Practice Enabled by Technology

• Single version of the Truth – from across multiple systems

• CRM, Orders, Forecast, Collaborative Demand view
• Integration to Finance (Monthly Financial Plan)
• Visibility of Budget in process
• Measurement of gap to Budget
• Use S&OP process to inform budget
• Ability to convert between units and dollars – will tell two different stories
• Earn and report in dollars – make and sell in units
• Ability to analyze data to determine RCA on out of tolerance plans and
recognize bias
• Capability to drill down below family to lower level drivers/issues
• Linked to system of record – aligned to execution plan

© 2014 Steelwedge Software, Inc. Confidential. 38

Holistic View – Supported by Collaborative Process

• Need to view Demand Planning as an input to the overall demand and supply balancing process
• Tools need to support integration and timely data access
• Eliminate the time required to consolidate and manage data – Utilize this time for analysis

© 2014 Steelwedge Software, Inc. Confidential. 39

Outcomes

Results/Benefits
First time in Company B’s history they are able to view demand in a single
source system with a common understanding on how the numbers are
generated
Challenges and Lessons Learned
Sophistication of their NetSuite ERP solution
SW2 project is uncovering gaps in their original ERP implementation
Next Phase
Multi-Phased roll out of S&OP Ops, Executive S&OP and Insight
Planned in the form of “Release Drops” versus a structured series of individual
SOWs

© 2014 Steelwedge Software, Inc. Confidential. 40

Recap: Keys to Demand Planning Success.

1. Separating Demand by Demand type

2. Ensuring Accountability for Demand Plan
3. Use Statistical Forecasts where appropriate:
4. Collaborate to develop the Demand Plan
5. Real time visibility across business

© 2014 Steelwedge Software, Inc. Confidential. 41

 Q&A

© 2014 Steelwedge Software, Inc. Confidential. 42

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