demand sensing: finding the right balance
TRANSCRIPT
0Spinnaker Proprietary & Confidential 2014
All Rights Reserved 0Spinnaker Proprietary & Confidential 2014
All Rights Reserved
October 28, 2014
Demand Sensing:
Finding the Right Balance
1Spinnaker Proprietary & Confidential 2014
All Rights Reserved 1
350+ resources
200+ clients globally
Spinnaker Overview
2Spinnaker Proprietary & Confidential 2014
All Rights Reserved 2
Goals For The Session
• Understand demand sensing key
concepts & capabilities
• Change management impacts on
organization; demand planning
maturity curve assessment
• Walk away with an improved,
objective view of the fit of SAP’s
demand sensing capabilities
Business
Process
People
Technology
3Spinnaker Proprietary & Confidential 2014
All Rights Reserved 3
Introduction
Joel Argo
Senior Manager
• A supply chain professional with 10 years of experience in Food & Beverage, CPG and Medical Device industries
• Extensive knowledge of Demand Planning, Supply Planning, Production Planning, Purchasing, and S&OP across SAP and JDA technologies
David Foster
Senior Manager
• A Supply Chain Functional Consultant with over 25 years of industry and IT experience
• Experience with hands-on cross module requirement analysis, design/development, configuration
• Rollouts experience in SAP/IBP, SAP/APO/DP/SNP/PPDS/TPVS/Alert Monitor, ECC/MM/PP as well as SAP/BW
4Spinnaker Proprietary & Confidential 2014
All Rights Reserved 4
Goals For The Session
• Understand demand sensing key
concepts & capabilities
• Change management impacts on
organization; demand planning
maturity curve assessment
• Walk away with an improved,
objective view of the fit of SAP’s
demand sensing capabilities
Business
Process
People
Technology
5Spinnaker Proprietary & Confidential 2014
All Rights Reserved 5
Demand Planning Challenges
• Traditional statistical forecasting methods have become efficient
• Difficult to integrate real time data into a quantitative time series
statistical model
• Same time series model applied across short, mid, and long term
plan
• Difficult to plan product launches and promotions without
adequate sales history
• Time consuming to evaluate stat models across hundreds of SKUs
• Low volume items remain difficult to forecast due to fluctuations
in demand
6Spinnaker Proprietary & Confidential 2014
All Rights Reserved 6
Forecasting Improvement Initiatives
• Utilize Demand Sensing
technologies to
statistically improve
forecasts
Forecasting
Process
Improvement
Initiative
Demand Sensing
Description
• Use multi-variable statistical engine to
improve forecasts by regressing
• Original forecast
– Order and shipment history
– Other data streams (e.g., POS, channel
inventory, warehouse withdrawals)
Statistical forecasting
• Forecast shipments
directly at DC location
for certain SKUs
• Identify SKUs where shipment-based models
are better than consumption
• Centrally forecast using shipment statistics
• Improve current process
and identify changes that
enable wider usage
Consumption-based
forecasting
• Enforce tool and model compliance;
monitor and reduce over-rides
• Implement changes to CRM
– Merchandising profiles
– Customer-specific shipment profiles
7Spinnaker Proprietary & Confidential 2014
All Rights Reserved 7
What is Demand Sensing?
Key Capabilities for Demand Sensing
• Demand pattern recognition
who is buying what, when, and in what quantity?
• Forecast Optimization
How does the sales plan translate to orders?
• Optimal demand steering
if demand patterns suddenly change, and you do not
have enough of product A, can product B be used as
a substitute and can customers be steered to that
product instead?
• SKU level forecast serves as an indicator of
the future
• Shipment history serves as an indicator of
the past
• Open customer orders and POS data serve as
the indicator of present market activities
Key Inputs
Demand Sensing is a demand-driven, customer-centric approach to planning and execution that aligns process with customer demand.
Example:
8Spinnaker Proprietary & Confidential 2014
All Rights Reserved 8
Demand Management Vs. Demand Sensing
Demand Management Demand Sensing
Primary
Purpose
Long term strategy and sales forecast,
Better manufacturing planning
Short / Mid term, tactical forecast, Better
replenishment planning to one, or a few, key
retail customers
Data UsedShipments from manufacturer’s DC to
customer’s DC
POS and in store inventory data
Completeness
of Data
Across all customers Across one, or a few, key retail customers
Rolling
Forecast Time
Horizon
Rolling monthly forecasts over a year Rolling daily forecasts over a year
Key Forecast
by Time Period
Consensus demand plan for +18 months
horizon
Next week’s or month’s replenishment plan to
the DCs
Key Drawback
Susceptible to Bullwhip Effects in
operations causing increase in the cost
of time money and resources
Many retailers lack sufficient in store inventory
accuracy to make this feasible but “Big Box”
retailers are ready.
9Spinnaker Proprietary & Confidential 2014
All Rights Reserved 9
How Does Demand Sensing Work?
Demand Planning
Open Orders
Other Demand
Streams:
POS, CPFR
Demand Sensing Algorithm
Supply Planning
Optimized
Demand Plan
Forecast
Orders
Orders, Customer
DC inventory,
promotions etc..
Multi-variable sensing
and smoothing
statistics to refine
shipment forecast by
DC
10Spinnaker Proprietary & Confidential 2014
All Rights Reserved 10
Forecast Segmentation will replace
“one size fits all” approach
Deployment0-6 weeks
Operational planning 6-26 weeks
Strategic planning 6-36 months
Multi-variable
sensing and
smoothing statistics
to refine shipment
forecast by DC
Statistical consumption models by
customers translated to shipment
forecast by DC
Supplemented with regular
collaborative validation with
largest customers
Statistical shipment models generate direct shipment forecast by DC
Shipment trends
supplemented with
category growth
trends, share trends,
and growth strategy
Recommended Forecasting Process
Daily Weekly MonthlyMonthly
High volume
items and low
volume items
with high
forecastability
Low volume
items with low
forecastability
Forecast Segmentation
Demand Sensing InfluencedHigh Low
11Spinnaker Proprietary & Confidential 2014
All Rights Reserved 11
Demand Sensing Value Realization
• Operational Financial Goals– Reduce working capital costs
– Improve customer service
– Minimize production costs
– Increase network capacity
– Improve cash flows
• Organizational Goals– Streamline Demand Planning Process
– Improve KPI’s
– Improve Financial Planning
12Spinnaker Proprietary & Confidential 2014
All Rights Reserved 12
Flash Poll
Do you want to learn more on the benefits
of Forecast Segmentation?
Yes
No
13Spinnaker Proprietary & Confidential 2014
All Rights Reserved 13
Goals For The Session
• Understand demand sensing key
concepts & capabilities
• Change management impacts on
organization; demand planning
maturity curve assessment
• Walk away with an improved,
objective view of the fit of SAP’s
demand sensing capabilities
Business
Process
People
Technology
14Spinnaker Proprietary & Confidential 2014
All Rights Reserved 1414
Demand Planner Activities – Where should they spend their time and how will we enable?
Demand Planner Time Allocation
Current Target
Source: Based on Spinnaker’s client experience
IT Related Activities 35% 10%
(Includes data collection / validation)
Statistical Forecasting 15% 10%
Modeling 10% 10%
Building intelligence 20% 35%
Alignment Consensus 20% 35%
Demand Sensing
has greatest
influence
15Spinnaker Proprietary & Confidential 2014
All Rights Reserved 15
Training Assessment
• Define Roles
• Establish benchmarks
• Assess organization capability and knowledge using best practice competencies
• Prepare skill gaps & role inconsistencies
• Document maturity gaps from best practices
• Document training plans per person
• Prepare group training curriculum
• Prepare training plan per person and associated Gap Closure
• Action Plan
GAP Analysis
Training Plan
Our Approach to Organizational Readiness
16Spinnaker Proprietary & Confidential 2014
All Rights Reserved 16
Demand Planner Competency
• Organizational gap analysis is measured for both the Demand Planning organization as well as the Demand Planner
• By doing this, organizations can identify strengths, weaknesses, and opportunities at several levels within the organization
17Spinnaker Proprietary & Confidential 2014
All Rights Reserved 17
Is Your Organization Ready For
Demand Sensing?
Planning Maturity Graph:
• Baked in or budget numbers
make up forecast
• No demand planning system in
place
• No S&OP process
• No formalized Demand
Consensus
• Manual forecasting process
• Demand planning system
implemented
• Formalized Demand
Consensus process
• Unrefined S&OP process in
place
• System driven statistical
modeling
• Measuring forecast accuracy
and bias consistently
• Formalized demand planning
system in place
• A robust streamlined S&OP
process encompassing all
levels of the organization
• Utilizes advanced statistical
modeling methods such as
MLR
• Runs simulation to determine
“best fit” stat models
• Manual but formalized CPFR
process in place
• Efficient Demand Consensus
process
• Formalized demand
planning system utilizes bolt
on applications to assist
with forecasting (i.e.
Demand Sensing)
• Standardized IBP process
with executive sponsorship
and involvement
• Advanced statistical
modeling methods which
harmonize POS and
shipment data
• Standardized demand
consensus process
• Demand Planning process is
driven by exception
management
TIME
PR
OC
ES
S M
AT
UR
ITY
Unaware
Aware
Functional
Skilled
Recommended
Level
18Spinnaker Proprietary & Confidential 2014
All Rights Reserved 18
Flash Poll
Where is your organization on a Demand
Sensing Maturity Curve?
• Unaware
• Aware
• Functional
• Skilled
19Spinnaker Proprietary & Confidential 2014
All Rights Reserved 19
Goals For The Session
• Understand demand sensing key
concepts & capabilities
• Change management impacts on
organization; demand planning
maturity curve assessment
• Walk away with an improved,
objective view of the fit of SAP’s
demand sensing capabilities
Business
Process
People
Technology
20Spinnaker Proprietary & Confidential 2014
All Rights Reserved 20
SAP’s Enterprise Demand Sensing
EDS – Enterprise Demand Sensing DSiM – Demand Signal Management
APO – Advance Planning and
Optimization
ECC – Enterprise Central
ComponentIBP – Integrated Business Planning
SCM – Supply Chain Management
21Spinnaker Proprietary & Confidential 2014
All Rights Reserved 21
SAP DSiM and EDS Overview
Key Capabilities:
• Excel Front End
• What If Scenario Capability
• Normalization of Data Streams
• Faster Performance
• Delivers Demand Visibility
• Predictive Analytics
• SAP Integration
DSiM
EDS
22Spinnaker Proprietary & Confidential 2014
All Rights Reserved 22
SAP’s Enterprise Demand Sensing Integration
23Spinnaker Proprietary & Confidential 2014
All Rights Reserved 23
Monthly / Weekly Forecast
Sales Order, Shipments,
Master Data
External Feeds:- Point of Sale- Market - Social Media- Distributor- Wholesaler- Other Information
such as Weather
Demand Planning
DSiM
ECC
Hana Based
Adjusted Forecast6 week Horizon
Adjusted Forecast 6 week Horizon
Adjusted Forecast6 week Horizon
SCM - APO
SAP’s Enterprise Demand Sensing in a
SAP landscape
Inventory Optimization
Deployment Planning
Supply Network Planning
SNP/IBP
DSiM – Demand Signal Management EDS – Enterprise Demand SensingECC – Enterprise Central ComponentSCM – Supply Chain ManagementAPO – Advance Planning and Opt.
EDS
Demand Sensing Algorithms
24Spinnaker Proprietary & Confidential 2014
All Rights Reserved 24
Non SAP Environment
Demand Sensing Algorithms
Output Option 2:Extracted and stored in a CSV format
SAP Hana Platform
EDS
Output Option 1: SAP Data Services to export to external systems
Inputs via :- CSV- Excel- Data Services- Data Generator
SAP’s Enterprise Demand Sensing in a
non-SAP landscape
DSiM – Demand Signal Management EDS – Enterprise Demand SensingSAP – Systems, Applications, Products
External Feeds:- Point of Sale- Market - Social Media- Distributor- Wholesaler- Other Information
such as Weather
DSiM
Non SAP Environment - Master and Transactional Data
25Spinnaker Proprietary & Confidential 2014
All Rights Reserved 25
Flash Poll
What is your organization's interest level
in a demand sensing tool?
• Fully Optimized Demand Sensing solution
• Have a solution, requires optimization
• Interested in implementing a solution
• Unsure
26Spinnaker Proprietary & Confidential 2014
All Rights Reserved 2626
Questions
&
Answers
In Closing…
27Spinnaker Proprietary & Confidential 2014
All Rights Reserved 27
Contact Information
877-476-0576
www.spinnakermgmt.com