Good demand planning practices in times of uncertainty

Business demand planning has been impacted by economic and geopolitical uncertainties such as high interest rates, supply chain disruptions and geopolitical tensions. These uncertainties make it difficult to accurately forecast demand and plan adequate production and inventory levels. As a result, planning teams may need to adapt their processes to respond to this challenge.

Faced with uncertainty and instability, some practices have proven to help minimize negative impacts on demand planning, such as:

– Searching and incorporating more data: The main source of data for forecasting sales and building operational plans is traditionally the historical series of sales and operation databases. However, in times of uncertainty, historical data may not reflect what will happen ahead. As such, planning teams may need to incorporate more data sources, such as social media analytics, customer feedback, and trending market indicators available in data lakes, to gain a better understanding of demand fluctuations;

– Scenario analysis: preparing several “future views” is useful because during periods of uncertainty, it is difficult to accurately predict what future customer demand will be and how market conditions may change. By creating multiple scenarios with different assumptions about the future, planning teams can be prepared for multiple possibilities and respond quickly if actual conditions deviate from the originally predicted scenario. By creating various scenarios, the company can be prepared for different possibilities, such as an economic downturn, an unexpected increase in demand, or a disruption in the supply chain. This allows the planning team to respond quickly to different situations, adjusting production plans and stock levels according to the actual situation;

– Collaboration: Communication and alignment between different departments within a company becomes even more critical. Planning teams may need to work more closely with sales, marketing, and operations teams to ensure they have the most accurate and up-to-date information to make informed decisions. Collaboration with key supply chain partners also helps to obtain more accurate information and make better decisions;

– Flexibility and frequency of updating plans: involves adjusting production schedules, inventory levels or even product offerings to respond quickly to changing market conditions. This requires reviewing and adjusting plans more frequently, ensuring that plans remain relevant and that teams can adjust their approach as needed. However, it is also important to strike a balance, as too many updates can create unnecessary interruptions or confusion among team members. Thus, it is important that follow-up is structured and purposeful, and that it takes into account the amount of time needed for plans to develop.

Although most of these practices are intuitive, many companies are unsure how to apply them in their demand planning processes on a daily basis. Multidisciplinary rooms, contingency plans, decentralized S&OE, CPFR and planning control towers are still not part of the well-established S&OP and IBP processes in most companies, which I will try to address in an upcoming post.