What is Oracle Demand Planning?
Oracle Demand Planning is a powerful and flexible OLAP tool that supports the forecasting of demand for sales of finished goods. Oracle Demand Planning is part of the Oracle Advanced Planning Solution, and seamlessly integrates with the other Oracle E-Business Suite modules.
Pre-seeded Dimensions, Hierarchies and Data Streams Flexible dimension, hierarchy and data stream creation Legacy data integration Demand plan scoping by line of business Revenue and quantity forecasting Statistical forecasting Product lifecycle and promotion management Service parts forecasting Dependent Demand Planning Exception management Internal collaboration Integration with APS and E-Business Suite Flexible reporting ± pre-defined and ad hoc
Forecasting: What, Why and When?
What is Forecasting?
Forecasting is a term used to describe the prediction of future events. Demand Planning is the process of recognizing econmic demands for products in the marketplace. Forecasting enables the future to be visualised, it creates a baseline against which actual data can be measured. The key in Demand Planning is to monitor the gaps between the anticipated (forecast) and the achieved (actual) and then, using forecasting skills and tools reduce that gap in the next cycle. ³The Forecast is an estimate of future demand. A forecast can be determined by mathematical means using historical data; it can be created subjectively by using estimates from informal sources; or it can represent a combination of both techniques.´ [APICS Dictionary]
..... evaluate marketing initiatives and decipher correlations between casuals and actuals To grow revenues and increase profitability!
When should you Forecast?
High level process just before budget cycle. leading to reduced costs.Avoid Over Production. increased responsiveness and improved customer service... Drive continuous improvement and migrate to intelligent models.There are lots of reasons why Forecasting is a good idea: ..Increase Buying Power.. compare forecast and actuals to budget.. Aimed at setting base for Budget discussion and high level capacity check (long horizon)
Process to set sales targets. allocation and production operations..Drive Continuous Improvement. Provide elements of Realism to reduce inventories driven by fanciful sales targets To increase knowledge: Project production capacity.Maintain Price Structure..Measure Awareness of Demand..) and drive / support Company Strategy To improve communication: Between all departments and affiliates....Reduce Inventory.. Process (weekly/daily) used to obtain latest sales data from Sales (orders + expected orders)..Meet Market Demand..... project future costs and revenues..Inject Realism..Support Budget. To anticipate change: Plan for future change (adjust for changes in the environment: competitors. Set once or twice a year..Minimise Stock-Outs..Schedule Resources.Create Stability in the Supply Chain. Applies to current month only
...Define Promotions.. The type of Forecast solution that is needed will vary depending in the reasons selected but the key drivers will probably be: To reduce uncertainty: Predict future demand and as such reduce uncertainty..Guide Company Strategy..
Process which is aimed at providing accurate predictions of market potential. Data used to drive supply planning.Manage Lead-Times. new entrants etc..
Dimension. The future direction of the company may rest on the accuracy of your sales forecasting. You have to keep taking the pulse of your company to know how healthy it is.
Revenue Forecast: What Money will be made by meeting the Sales Forecast ($)The Revenue Forecast is an assessment of the profit that a company might make (gross . the levels of Data that will be organised and the Timeframe to manage. It can make the difference between just surviving and being highly successful in business.
What Needs to be Procured / Made to meet the Sales Forecast (Qty)Demand Forecasting is the activity of estimating the quantity of a product or service that consumers will purchase and thus can be based on the Sales Forecast. apply supply chain constraints and accuracy factors. Levels & Timeframes
When defining a Forecasting solution it will be necessary to decide which Dimensions to use.cost = net) providing a financial baseline to measure achievement of business strategy. It is a vital cornerstone of a company's budget. Sales forecast reports & graphs enable you to analyze the health of your business. However the Demand Forecast should strip out Inventory.Sales Forecast:
What Customers will Order ($) Sales forecasting is a self-assessment tool for a company.
Sales Channel & Manufacturer Others: Sales Account. Relational databases are by definition two-dimensional (rows and columns) but OLAP databases like Oracle Demand Planning and Demantra enable the introduction of additional dimensions which can be likened to perspectives or views of information. the more significant the levels of safety stock and exposed risk become. These Dimensions can be combined or separated as your Business requrements needs and your data allows. Balance the reward of extra detail with the cost of Master data setup and maintenance!
Timeframe decisions include: the amount of past data used to generate the forecast. Basic Dimensions are: Time. Some of the key 'Bullwhip' factors are:
Levels are the groupings that are defined in each Dimension. Sales Compensation. Complaint. Product & Customer. the horizon time that is forecasted. Customer Satisfaction.Dimensons
Dimensions contain the core elements of your Data. the cycle time between each new Forecast and the period that is used to create accuracy analysis.
The Bullwhip Effect
The 'Bullwhip Effect' is one of the major issues for forecast-driven supply chains. The further away from the end customer. Useful: Organisation. Marketing Campaign. Service.
allocaton and forecast generation Time Dimension (the further in the future the less accurate)
Demand planning difficulties:
y y y y
Evolving market conditions Global Markets Multiple Sales Channels Multiple Sources of Information
y y y y y y y y y y
State of the economy Promotions Competitor responses Lot-size discounts Fiscal Budget cycle Alloctations Panic & preceptions Hedging The weather Stock-outs
. qualitive) Level of aggregation.Demand variability leads to significant supply chain inefficiencies:
y y y y
Data Sources (who is forecasting?) Forecast Method (quantitive.
Inputs are pieces of information obtained from ERP.The 'bullwhip effect' effect can be reduced through:
Collaborative planning KPI: ³You get what you measure´ Improved data sources Improved forecasting methods
Demand Planning Inputs. compare and adjust Forecasts. Members & Values
Inputs are the "Data Streams" (ODP) or "Series" (Demantra) that can be collected and loaded into Forecasting Solutions. There are virtually unlimited inputs to a Demand Planning Solution but some of the key examples can be identified as follows:
Historical Data Streams
y y y y y y y y
Bookings Shipments Invoices Returns Inventory Previous submitted Forecasts Distributor Actuals Syndicated Data
Forecast Data Streams
y y y y y y y y y
Statistical Forecast Annual Plan Revenue Forecast Sales Forecast Sales Pipeline Manufacturing Forecast Customer Forecast Backlog / Future Orders Incoming Supply
Causal Data Streams
y y y y y y y y y y
Stock-Outs Seasonality State of Economy Marketing Events / Promotional Activity Weather Labour Problems Price Changes Distribution Method Changes Consumer Earnings Production Capacity
. Legacy or Third Parties that can be used to create.
Cost.but what price? Average Selling Price.Similar to Moving Average but uses the forecast error to drive forecast direction. Price.Smooths data to create a less volatile line. What Members do your Planners need to see? All Customers and Items or just a selection? The Standard collections process might bring into your OLAP cube things all "items" (Toilet Rolls. Promotional and Historical adjustment Activity will need to be measured for effectiveness. Regression .
The advantage of the various Solutions that are available is that they can automate the analysis of hundreds of forecast types and their variations and then select the most appropriate.) rather than the things you need to Forecast.y y y
Style or Fashion Direct and Indirect Competition Political Events
Members are the Items.Uses at least one variable to predict another. Scissors etc.
Values usually means the number associated with the Members that have been collected in the Inputs. Future Selling Price.. These extra streams of data will need to be defined and stored and might be wanted in more than one Value (Qty. Typical Demand Planning Values will be Qty and Price . Coffee Vending Support. Don't forget the final Outputs at the end of each cycle the Forecasts will be sent to Finance and/or Manufacturing and/or Purchasing. Sales Reps etc. MAPE etc. Members. Smoothed past data can be used to create smoother forecasts. The more values required the more streams of data for the Planners to review not to forget the setup and maintenance. %.
More Inputs & Outputs
Having defined the Inputs. Levels and Values of your Plans you will then find that more data is required: KPI's and Exceptions will need to be calculated. Members will need to be grouped (see Levels) for Collection. Warehouses. Customers. that you view in your inputs. Exponential Smoothing . Reporting and Forecasting.)
Statistical Forecast Options
There are many different approaches to creating a Statistical Forecast but the most common forms are: y y y Moving Average . Margin. Two typical approaches are: Best Fit: Apply the most appropriate from a selection (ODP) Bayesian: Combine the best of many in one forecast (Demantra)
. Forecast Variance to prior Months and alternative Forecasts will be necessary...
Generally lower is better but issues like short lifecycles and unique customer products can force grouping levels. If you set levels too low the variations in data might be large causing decreased accuracy.
The Dimension Levels that you choose should relate to your company data and processes and the needs of the business. the forecast might pick up localised trends and allocate them incorrectly.
The accuracy of the Statistical Forecast will depend on the length of History analysed and the horizon of Forecast that is created.
What is Oracle Demantra?
Demantra is one of the Oracle Value Chain Planning family of Applications.Forecast Level
The results of a Statistical Forecast will differ depending on the Level that it has been created at. Fully integrated with Oracle R11 and R12. 3 years of past data is enough to generate season trends but this requies product lifecycle stability or the creation of suitable levels to group like-items. Demantra provides a Bayesian Forecasting capability in place of ODP's Best Fit approach. Statistical Forecasts generated from higher grouping levels can produce better results than using the lowest levels but inaccuracies can be magnified at aggregate levels! If you set levels to high. Other benefits range from Real-Time data to PDA functionality.
Oracle Demantra collects.
Oracle Demantra is actually comprised of a number of modules that can be mixed and matched according to your business needs. Workflows and Methods can be created to automate functions and security features enable the creation of user specific interfaces. Siebel.Deduction and Settlement Management .
And how does it do it?
Demantra is a web enabled tool that can be implemented in various ways: from a StandAlone single PC populated with data from Excel spreadsheets to a sophisticated solution integrated into your ERP System (Oracle E Business Suite. location & time information. generates statistical forecasts and enables comparions of actuals to forecast. Yes. stores and organises item. SAP etc. You don't have to create Statistical Forecasts .Trade Promotion Optimization
Demantra Pros and Cons
Fast collection & data loading process (much better than ODP) Has greater flexibility in Security / Setup / R&R Improved Forecast creation over ODP Improved Promotional. NPI and Event functionality Workflow Creation and Management Ad Hoc Hierarchy level value creation by end user Improved Graphical display functionality Customisation of Graphical display per user or user group Visible Comments and Audit trail
. The modules are: 1/ Demand Management (DM) 2/ Advanced Forecasting and Demand Modelling (AFDM) 3/ Real-Time Sales and Operation Planning (RTSOP) 4/ Predictive Trade Planning (PTP) . validated and then forwarded to other applications (such as Hyperion or ASCP) for action.) with hundreds of globally distributed users. but what does it do?
The standard blurb can create more questions than answers can't it? Fundamentally.Demantra comes from: Demand is our Mantra
Yes.you could just as easily use the previous cycle as a starting point. Planners interract with the Forecast (and related) data via worksheets that are quite simple to create and manipulate. Forecasts can be created and adjusted in Demantra. J D Edwards.
. PDA capability. accurate and efficient Forecasting tool. The ability to create ad-hoc levels in hierarchies might seem liberating but will inevitably create data problems. The payoff will be a much more versatile.
Business Transition Considerations
Considering implementing Demantra? Here are some transitional thoughts:
1/ Series in Demantra cannot be User Maintained .. In reality. setup and testing Series can really only be created by IT Colour Coding can really only be created IT Risk of RTS&OP module duplicating some ASCP functions Data only held at the lowest level means potential allocation and aggregation restrictions.. This means completing more thorough design reviews and more considerable training with End-Users on the significance / structure of Hierarchies and the layout of data in worksheets.
. Intersections need to exist before they can be seen in Demantra unlike ODP where all combinations are created by default. More Modules = more analysis. Consider the processes required to request and create new Series post Go Live. Source data should really only be maintained at the ERP Source which mean that this functionality will really only be used for limited business needs and should be restricted to responsible super users.Hierarchy Levels can be User Maintained
This is a swap of the current situation with ODP and therefore perhaps they balance each other out but.
2/ Sales and Operational and Promotional become more significant link into or aspect of Planning
Need Quality data and process for the new module RTS&OP currently these aspects are underutilised in ODP. Attribute Forecasting. a successful Demantra implementation will need even more up-front analysis and preparation than ODP. Gaining advantage from the new modules will require a new set of data to be collected and maintained.Promotions / Causals visible alongside Plan data Dependent Demand Functionality Other features: Off-Line working. There needs to be a far greater emphasis on creating a full set of correct Series prior to implementation.
Some Demantra Negatives
Although data collection is fast filtered worksheets will be necessary for large volumes of data Relatively untried in Europe compared to the US Loss of ad-hoc Drill Down (requires embedded worksheets) End-user formatting restrictions in Worksheets: colour coding and resizing. Option for Real-Time rather than Batch mode transactions.
A greater complexity in the Statistical Forecast will require a greater level of sophistication in end user understanding.
. Forecast level and reporting level can be different due to the dynamic forecast creation process in Demantra. This can mean a discrepancy in expectations and also provide frustration when a set forecast level is required. Extra training and support will be necessary to bring the planners to the required level of expertise.
4/ Bayesian Forecasting
The change from a Best-Fit solution to a Bayesian will mean a re-evaluation of the preferred Statistical method.3/ Simplicity versus Complexity
At what stage is your Planning Department? Many Companies are at entry-level stages of Demand Planning sophistication there is little to be gained and potentially much to be lost by replacing and overcomplicating any simple solutions.