Supply chain planning is a team sport like football, where each player brings their specific skills and knowledge to make the whole game plan work. It is played best when all the players that have something to contribute can do so in a way they are comfortable and in a voice that leverages their insights. Supply chain operational professionals live and breathe quantities, but a lot of other participants in the demand planning process, such as sales and marketing, often deal with their demand planning-related activities more comfortably in dollars.
Three key takeaways:
Please read on for a more detailed description
Getting other involved
It is important to have sufficient measures of dollars so all parties can participate with numbers they use and that facilitates them adding value. And to eliminate an endless debate of where those dollarized numbers came from in consensus meetings. But not to have so many measures of dollars that planning turns into a pure financial planning exercise (and debate).
It is also common for those groups to work at some level of aggregation and not at the individual item/part number level. The next section combines those thoughts and provides some examples.
The devil is not always in the detail
The best demand plans are the results of a consensus process. To get a consensus, the demand plan(s) need to be expressed in dollars and ultimately must align with corporate financial plans, such as the Annual Operating Plan (AOP). The number of dollar expressions, such as revenue, margins, etc., in current dollar terms and in future/projected dollar terms, is a function of the industry, the volatility of the pricing in the markets served, etc. There is no one answer as to the number of dollarization, but there is a need to have at least one good one!
Executives think dollars
Executives often think and work in dollars of revenue, and in margin and market share percentages. And in product families and broad product groupings. And in market segments and broad geographies. Any good demand planning process must include (and encourage) executive participation in the consensus process, even if just in the S&OP portion of getting to a final demand plan, consensus demand constrained by supply.
There may be mini-consensus processes, like in geographical regions or in market segments, in the creation of the unconstrained demand plan, where the number of units are more prominent than dollars, or at least of equal importance. But the further those plans go out into time, certainly, for the Executive S&OP processes, the more likely dollars will be a key measure to define problems. And dollars will assuredly be a key component in deciding what course of action is necessary to resolve supply-demand mismatches, as well as to consider courses of action at a more strategic level.
Dollarizing demand plans is not only a way to double-check the sanity of quantities being forecasted, but it is also a way to encourage those that can contribute to “marketing or field intelligence” to participate in the process. Sales, marketing, and certainly financial people are often more comfortable in thinking about and contributing their insights in terms of dollars. Executives, who we want to participate in the unconstrained demand plan and in S&OP processes, often think in terms of dollars, especially the further into the future the planning goes. Making dollarizing demand plans part of your normal planning routine will pay dividends.