Demand planning process – who should be involved?

When it comes to the demand planning process, each division has its own set of goals and objectives. While the sales team may demand consistently high levels of availability in order to satisfy orders, the finance team may be more interested in inventory cost. This is compounded further when it comes to the demand planning process as there are likely to be different opinions as to what should and should not be included as part of the forecast procedure. With this in mind, how can you adopt a more encompassing approach to demand planning?

Within a business, each division has its own set of goals and objectives. While the sales team may demand consistently high levels of availability in order to satisfy orders, the finance team may be more interested in inventory cost. As a consequence, the supply chain team are under constant pressure to strike the balance between service levels and investment in stock. This is compounded further when it comes to demand planning process as there are likely to be different opinions as to what should and should not be included as part of the forecast procedure.

On one hand, if sales are in advanced talks with a hot prospect, it would be hugely disappointing if the business was unable to deliver in a timely manner due to the fact that the additional demand had not been taken into account. Equally however, if you were to respond to expected demand by increasing inventory levels, the supply chain team would no doubt face a difficult discussion with the finance team as to why there is so much excess stock. With this in mind, how can you go about developing a more collaborative approach to demand planning?

Demand planning process – How collaborative is yours?

While demand forecasts are typically based on rational supply chain data such as historic demand and confirmed orders, there is a strong argument to encompass further insights from the sales and marketing teams. After all, with greater insight into anticipated demand your business will also be better positioned to guarantee customer satisfaction. Furthermore, the more readily and reliably you can respond to customer demand, the greater advantage you will have over your competitors.

However, there is a big difference between a confirmed order and interest to buy from a hot prospect. As a result, before adding sales data into your forecast procedure, how can you be sure that these speculative insights are a realistic reflection of what the actual demand will be? Furthermore, how can you justify investing in additional stock or stocking an item which is normally non-stocked to the finance team if you are basing your inventory decision on little more than a hunch?

The business of B.A.N.T.E.R

Through introducing a set of questions based on the B.A.N.T.E.R acronym discussed in the previous whitepaper, this article is designed to help inspire collaborative conversations with other divisions within your business. These discussion points should not only enable you to assess the quality and relevance of inputs from the sales team and other divisions, but also to build a more accurate forecasting procedure.

In essence, the B.A.N.T.E.R acronym highlights a number of areas which should be explored when assessing the validity of a sales opportunity. While this approach was initially designed to support the activity of the sales team, this acronym is also relevant from an operational perspective to anyone that is responsible for demand planning process or forecasting.

What’s the customers budget?

In essence, this aspect is all about determining whether or not the customer has already designated funds to make a purchase. For instance, if the funding is not assured, the chance of a sale falling through is far more likely than if a budget has been specifically set aside. Likewise, does this customer have a history of pulling an order at the last minute? If a customer is prone to leaving you high and dry, questions have to be raised as to whether this future demand should be taken into account.

Finding the answers to such questions can often be very difficult given that customers can often be reluctant to divulge too much financial information during the sales process. However, given that such information is key to gauging the likelihood of a sale, there are a number of things to consider when determining whether funding is assured or not. In order to effectively assess the budget situation, you should ask the sales team the following questions:

• How does the customer go about prioritising investment?
• Is there a critical reason as to why the customer wants to make a purchase
• Has the customer’s budget ever been reallocated in the past?
• What ROI is being placed in front of the prospect for your product?

Who has the final say?

Most purchasing decisions require authority. If the purchaser does not have the authority to make the final decision, then the risk of the sale falling through is inevitably higher. Even though the preliminary stages of the sales cycle are often delegated to subject matter experts, the ultimate final decision often rebounds back to the delegator. As a consequence, it is important to take this into account before making any serious inventory decisions. In order to attain whether sales information is based on feedback from someone with a sufficient level of authority, you should open up discussions around the political alignment between the decision maker and your sales team. Questions may include the following:

• Is the ultimate decision maker known?
• Do you have political alignment with the ultimate decision maker?
• Does the ultimate decision maker understand the value proposition of your products on offer?
• Has the ultimate decision maker ever vetoed a decision in the past because of specific loyalties to another supplier?

How urgent is demand?

As mentioned in the previous whitepaper the goal of establishing the customer’s ‘need’ is to assess their willingness to make a purchase. If the customer has an urgent need, the chances of the finance being re-allocated is far lower. Without a full understanding of what is driving a customer’s decision, you risk unnecessarily investing a considerable amount of time and money to satisfy a demand that never materialises.

On the other hand, however, if you fail to identify an urgent need in time, this could cause the customer great frustration. In the worst-case scenario, if you are unable to meet customers’ expectations, you risk losing them to a competitor as they may be better positioned to satisfy demand more promptly. Furthermore, in the event that the sales team have made the customer “special promises” to deliver earlier than usual, any hold up could seriously hamper customer satisfaction.

Discovering a customer’s need requires concentrated drilling-down. In order to understand the urgency of their requirement, you should ask the sales team the following questions:

• What has the prospect identified as their ‘pain’ – is there a critical reason to buy?
• Is this purchase something that has to be addressed soon or is I just a ‘nice to have’?
• If the customer didn’t take action, what would be the impact on their business?
• How will our product/solution resolve the impact of their need? can these benefits be proven?

What timescale is the customer working on?

Heavily linked to the need element of B.A.N.T.E.R, the time element is focused on establishing exactly when a prospective customer expects to receive their order. If a customer is expecting to receive an order as soon as the contract is signed, then this places stress on the supply chain team to ensure that all items are available, in full, as and when the customer is ready to buy. However, if a customer has a flexible time scale this gives your supply chain team breathing space. For instance, if the lead time allows, this may mean the order can be held off until the customer demand is confirmed. Given that this element will ultimately determine exactly when your business has to take action, it is important to understand the customer’s delivery expectations. To gain a better understanding of the customer’s timescale, the following questions could be used to open up dialogue with the sales team:

• From the customer’s perspective, is there a burning requirement which requires attention immediately?
• Does the customer talk in general terms such as ‘around this date’ or has the customer defined specific delivery deadline?
• Has the customer been consistent with time requirements in the past?

Are you able to execute?

While other elements of the B.A.N.T.E.R acronym are focused on the customer, the “execution” element requires you to look internally and assess whether you have the capability to meet the buyer’s requirements. Through taking into account factors such as your current availability and ability to secure additional stock, you can begin to understand how well aligned your offering is with the needs of the customer.

There are a number of things to consider when determining your ability to execute a customer order. Given that various business divisions may have an influencing factor on your businesses capacity, these following questions should be used to create discussion between both sales and finance as well as any other divisions within the business.

• What is the accepted level of risk within the business?
• Who ultimately determines the best course of action?
• What’s the potential impact to the business if no action is taken?
• Is there already a business strategy in place in order guide this decision making process?

What do your customers really want?

The key here is to establish whether you understand the root requirements of the customer. For instance, if a customer was to orders a large quantity of nuts from a wholesaler, is there also a requirement for bolts?

It is imperative that the sales team has researched well and listened to what the real objectives of the buyer and then aligned their products/ solutions with these requirements accordingly. Determining the answers to the following questions can provide the information that can assist you in quantifying a customer true requirement.

• What has the customer asked for and defined as their product needs?
• Is the customer familiar with all of the options available to them?
• Are we able to satisfy all of the customers requirements?

A better way to work together

Creating meaningful dialogue between different divisions can be a real challenge. However, through taking time to understand the customer needs and expectations as well your business ability to meet these requirements, you can start to develop a clearer picture of what data should and should not be included as part of the forecasting procedure. The benefit of such discussions not only provide greater insight in to demand, but also reduce risk of unnecessarily wasting resources on deals than never come through.