Supply chain planning is a team sport and it is played best when all the players can contribute. In this regard, the pre-consensus and consensus processes are an important part of any game plan. To this point, multiple plans have existed, for multiple purposes. Now the challenge is to merge – marry – negotiate all those plans into one plan that represents the consensus unconstrained demand plan that will be used to identify supply constraints.
Three key takeaways:
- It is not about fancy math; it is about building a process that requires discipline and desire.
- There are people, functions and departments that have info that can make a demand plan better.
- Done well, the consensus process breeds buy-in and accountability from the contributors, produces real results and is instrumental in building a planning-centric culture.
Please read on for a more detailed description
It is not about the math
Consensus is not a mathematical formula, although math can be used to help show what adjustments and concessions made in the past really worked. Consensus is about a process that examines all of the various insights, balances those against past history and management views of the future and makes disciplined agreements about a plan that everyone can buy into and work hard to make work!
Since supply chain planning is the primary recipient of the consensus unconstrained demand plan (with the need to have the best demand plan they can use to drive supply chain planning), they often bear the burden of being the custodian of the process. Since any plan needs a set of assumptions and a starting point, it is very common for demand planning to start with history and use math to generate some statistical forecast. That forecast might use advanced statistical methods to detect trends and seasonality, to identify outliers and even do auto-corrections on them, etc. But that is just using the rear-view mirror, no matter how big and clear that rear-view mirror maybe.
There are other functions in the organizations that have insights into what happened that may be useful in adjusting the statistical forecast, but, most importantly, they may have insights and knowledge about the future that trumps what the past may suggest. A consensus is about combining those insights with what history tells us so we learn from the past, adjust it with knowledge of the future, but not let certain behavioral elements (such as bias) carry over to affect the forecast!
Many voices need to be heard
Not only do many voices need to be heard, they need to be understood. As the custodian of the process, supply chain planning must create the “dictionary” that enables those voices. While still working with a supply chain focused set of dimensions and measures (i.e. units and hours of capacity), supply chain planning must find levels in the major dimensions of products, geographies, channels, etc.; create measures such as the various dollarizations many functions use; and ensure the time periods used in the plan correspond easily to those used by the participant functions. Examples are:
- Sales – may work in some products, but also product families/groupings; in sub-geographies and geographies; by channels (direct and indirect); by key customers; will work in both units and by dollars.
- — Need to align to sales plans (and quotas), which will affect their focus and behavior to drive demand in the short-term.
- — Will have knowledge of large projects and/or large volume orders (LVOs) that may affect specific time periods in the near-term.
- — May have some guess at to changes in buying preferences (from either channel partners/distributors or the end customers).
- — Should have knowledge of competitors and their activities.
- — Will most likely be good in the short term (the next 30 – 90 days with some of the specifics but may only have broad guesses at some level of aggregation beyond that).
- Regional and divisional management – will have general impressions of what the future may be, at a minimum, even if just from the general near-term socio-economic conditions and trends within their regions or divisions.
- — Will probably be best in the short term (the next 30 – 90 days) and maybe best at levels of aggregation.
- Marketing – often work in product families; in general market segments for broad activities; specific products in target markets for more pointed activities.
- — Need to find a way to capture the anticipated results of general marketing activities, such as ad campaigns. And also capture more pointed promotional activities, including pricing-based promotions to shape short-term demand by specific channel or product line.
- –May work in a number of dollar measure, in addition to some unit volumes.
- — In the longer term, building a library of resulting impacts from the various marketing programs done at the various levels of all the dimensions of the plan and being able to apply those planned (and budgeting) events to future periods at the right level are the holy grail of this type of planning.
- Product management – should have the best information on the timing and related activities for NPI (new product introductions) and their possible launch profiles and EOL (end of life) ramp-down plans and decay curves.
- — Product management may work in both the short-term and in the longer term. Their knowledge of the market(s), competitors and customer buying preferences are often hard to quantify but well worth the effort to do so.
- Finance – typically has a variety of financial measures that can help guide planning. At a minimum, they may very well have numbers that will act as a gauge as to the viability (and the corporate acceptability) of the various plans that may be considered in the consensus process.
It does not have to be perfect, but the better it is ….
Much is written and many opinions are espoused as to how pre-consensus and consensus meetings/exchanges should go. From our perspective, the general “corporate” mindset and executive participation and attitudes can have a greater influence than any other single “trick” to getting to a great unconstrained consensus demand plan. The plan does not have to be and probably never will be perfect. But is important that it be good. The participants need to understand their contributions and feel good about them, believe in the plan, and make that plan (or their part of the plan) a key part of what they execute on in their day-to-day work.
As with all plans, they need to be measured. And reviewed. There may be an endless search to find which participant group is adding value and which is not. Or, more likely, which group is adding value in specific segments of the plan – at some product family, geography or market, etc. and in what time frames (very good over the next 30 – 60 days and not so good beyond that or vice versa).
With the right participants bringing their meaningful insights into the process and with the right measurements and judgments on the impact of those insights, the plans will get better and better. And, not only will the plans get better, the sense of ownership in the process and the accountability for results get better.
This process can be a key part of building planning DNA in an organization. A common, and unfortunately, not a very good practice, is the use of the consensus activity as a clerical activity of updating forecast numbers. Stakeholders send their updates to the Demand Planner and that person makes changes in the system, followed by a review meeting to “bless” the plan. The real consensus process should be an active discussion or debate with each group using the system to develop their viewpoint.
The consensus unconstrained demand plan represents the best composite thinking and plans of all of the key participants in demand planning. It starts the process of evaluating supply constraints that leads to the Executive S&OP meeting and the one plan that drives the organization. There is no magic formula that will produce the consensus unconstrained demand plan. Consensus is reached by the various participants working with their data and plans in a way that ensures their insights are properly understood and evaluated for consideration in the final unconstrained demand plan.