page 1
page 2
page 3
page 4
page 5
page 6
page 7
page 8
page 9
page 10
page 11
page 12
page 13
page 14
page 15
page 16
page 17
page 18
page 19
page 20
page 21
page 22
page 23
page 24
page 25
page 26
page 27
page 28
page 29
page 30
page 31
page 32
page 33
page 34
page 35
page 36
page 37
page 38
page 39
page 40
page 41
page 42
page 43
page 44
page 45
page 46
page 47
page 48
page 49
page 50
page 51
page 52
page 53
page 54
page 55
page 56
page 57
page 58
page 59
page 60
page 61
page 62
page 63
page 64
page 65
page 66
page 67
page 68
page 69
page 70
page 71
page 72
page 73
page 74
page 75
page 76
page 77
page 78
page 79
page 80
page 81
page 82
page 83
page 84

the plan. Specifically, action plans are created to assure that the anticipated demand happens. The plans also help to prioritize the demand when there is a shortage of supply. And when demand exceeds supply, the plan defines the policy that determines how the product is to be allocated among the various customers. There are four major steps in the demand management process: 1. Create the demand plan. The first thing is to predict what your customers are going to buy. A demand plan is the forecast plus the assumptions behind the forecast plus the action plans to make the demand plan happen. There is a significant difference between a forecast and a demand plan. A forecast is typically a number generated either by a statistical forecast package or developed manually based on history. Historical data is projected into the future using a series of algorithms to identify patterns and trends. By connecting where you Strategic management September 07 Businessexcellence 9 products, and end-of-life rationalization of older products. The second step of the S&OP process is the demand review (Figure 1), which is the focus of this article. The output of the demand review is a timely aggregate unconstrained demand plan which becomes the basis for the integrated set of planning numbers used throughout the sales and operations planning process. The key to this step is in having an excellent demand management process. Demand management is the function of recognizing all of the demand for the products and services that are required to support the marketplace. Demand management encompasses the activities of demand planning, order entry, and order promising. Demand elements include customer orders, sister division requirements, samples, displays, spare parts, and internal needs, such as branch warehouse/distribution center requirements, interplant orders, and aftermarket and service requirements. Service demand includes that which is required for implementation support and maintenance or repair support. The major components of demand management include the demand plan, the assumptions behind the plan, and the action plans necessary to execute

Businessexcellence September 07 10 have been to where you are going, the statistically derived forecast gives a base set of numbers from which to work. The one thing we know about forecasts, however, is that they are constantly changing. A statistically generated forecast by itself is insufficient to generate valid demand plans. The forecast itself may not be incorrect, but the assumptions behind the numbers are usually the cause of error. These assumptions are typically about the customer, the market size, market share projections, the competition, the economy, the leading indicators, product availability, and your company’s sales and distribution resources. The accuracy of these assumptions needs to be measured to determine which assumptions were correct and which were not. These findings foster a better understanding of what drives demand and ultimately leads to the creation of an improved and valid demand plan. To develop this plan, an organization requires multiple views and inputs of the demand, among them: • The marketing view. This includes market plans, pricing plans, promotions, competitive analysis, economic analysis, and external factors. The marketing view tends to be longer range in scope. • The sales view. This includes sales plans, territory plans, customer plans, and incentive plans. The sales view tends to be a shorter range perspective. • The product management view. This includes the plans to develop the brand and products as well as the future view of the products. • The customer view. This includes the customers’ selling and marketing plans, promotions, buying plans, and schedules. • The statistical view. This includes the statistical forecast and any modifications to the forecast needed to correct for abnormal demands or known changes to the forecast over time. • The business plan and strategy view. This enables us to see the gaps in revenue between the demand plans and the business plan. When all of these inputs are collected, analyzed, and included in the demand plan, the demand plan is in reality the collective, collaborative best judgment of the sales and marketing functions of the business. 2. Communicate the demand plan details. The demand plan is the basis for the integrated set of planning numbers used throughout the sales and operations planning process, therefore it is essential to share the demand plan’s details at both the aggregate and mix levels to all the functions of the business. It needs to be communicated to the sales organization that has to execute it, to the supply organization that has to make it, and the finance organization that has to cost it out and compare it to the business plan. 3. Create a consensus plan. In the third step of the demand management process the objective is to influence the key players to develop a consensus demand plan. The sales organization typically talks in terms of customer or territory plans while marketing talks in terms of market or product plans. Because they see the world from different perspectives, their views of the future are often not in alignment. The demand management process, properly executed, brings these two views together where they jointly develop a demand plan that marketing can support and sales can commit to sell. 4. Manage the exceptions. The fourth element focuses on the timely and effective management of exceptions, such as abnormal demand, and to control areas such as the allocation of product. When abnormal demand occurs, demand management must decide how to accommodate this demand while still protecting its regular customers. The demand review meeting in the sales and operations planning process reviews and considers inputs such as business strategy, sales forecast, customer plans, market intelligence, statistical projections, and the product management plans. The product portfolio changes developed in the first step of the S&OP process are included (Figure 2), as these inputs are the basis figure 1 Integrated Business Management – S&OP