Tag Archive: demand

Is Demand Planning/ Sales Forecasting Hype or Valuable?

September 9th, 2019

According to Gartner statistics,significant bottom line results can occur with just a 1% improvement in forecast accuracy. In fact, there are staggering improvements in lead time, inventory reduction and margins, so why not at least explore the idea? There are lots of worries expressed by clients and contacts:

  • We cannot predict what our customers will order!
  • Customers don’t even know what they will order! (And, in seeing these ordering patterns, I concur that this is often-times an accurate statement.)
  • Since we are using lean, our lean consultant told us we no longer need forecasts.
  • We are a small company and don’t have resources to focus on forecasting
  • And my favorite, “Why in the world would our significant sales team listen to you?”

I just have one question, if depending on the industry and study, a 1% improvement can lead to a 2.7% to 7% improvement in cash flow and minimally a few percentage points cost improvement in key categories such as freight, wouldn’t you be remiss if you didn’t consider your forecasting process? Of course you would be!

We have yet to run across a client that couldn’t improve the forecast, no matter how daunting the task seemed. Since the outcomes are substantial, it was worth the effort.  And, the effort was typically minimal compared to aligning the people on the forecast.

A few tricks of the trade in driving results with forecasting:

  1. Let your tool (whether Excel or a sophisticated system) do the work for you – From an 80/20 standpoint, there is no doubt that a simple tool will perform far better than even your best person. Develop your base.
  2. Focus on exceptions – On the other hand, your team is best equipped to provide insights and feedback on exceptions. Use their strengths.
  3. Drive results, not blame – Remember, the definition of a forecast is that it will be inaccurate. I’ve yet to run into a client with a perfect forecast. With that said, the three most impressive were across the board – a $100 million dollar facility of a multi-billion dollar aerospace organization with a manually generated forecast, a close to billion dollar consumer products company with a home grown system and smart people, and a rapidly growing <$10 million dollar manufacturer with an Excel-based system with smart, agile and process-oriented people. None of these folks ran around blaming anyone with forecast inaccuracy yet they all outperformed their competitors.

Perhaps it’s time to take a second look at your sales forecasting process. Who is responsible? How does it work? You never know what you’ll discover as you shine a flashlight on the process. If you’d like to discuss forecasting and demand planning further, contact us.

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The Value of Alignment: Sales, Operations & Finance

May 30th, 2019

Alignment might sound like a fluffy concept, but it delivers bottom line results. Our most successful clients have achieved the most substantial results from alignment. Although SIOP (Sales, Inventory, Operations Planning) gets a wrap as a technical topic, in our experience, it is the alignment portion of SIOP that delivers the bacon!

For example, in one client project, the Sales Leader was concerned about service levels. He knew that service was the differentiator in the marketplace, and if they didn’t have quick lead times and responsive customer service, it would negatively impact his ability to grow the business. On the other hand, planning knew that sales tended to come in dramatic spikes which were hard to predict in advance and so strategic inventory could make sense. Operations wasn’t too keen on inventory since they had a lean mentality with the view that inventory was ‘bad’, and they were concerned about capacity and staffing. Accounting set rules on overhead rates as a percentage of sales on a monthly basis which caused HR and Operations to hire and fire temps continually (and sometimes full-time resources). Overtime wasn’t used as a rule of thumb and was seen as costly by management, In fact, it was the only client we’ve ever worked with that didn’t use at least some percentage of overtime on a continual basis. And, of course, R&D created new products and had no idea about the volume and the impact on capacity and staffing. In essence, no one was on the same page!

We created a demand plan based on historical forecasts with sales input, confirmed the capacity and staffing levels required to meet that forecast and determined that if we level loaded the forecast over a quarter, we could create a win-win: improved service during the sales spikes with improved margins (lower temp turnover, improved efficiencies etc.). But it didn’t matter if we didn’t align the team. That was the 80/20 to creating success (and is ALWAYS the hardest part). Fast-forward 3-6 months down-the-road: We shortened service dips from the sales spikes, increased the service levels and reduced costs.

These types of client results are commonplace with alignment no matter your position in the supply chain or the world. Have you considered whether your teams are saying they are aligned or whether they are truly using the same playbook? It often will make the difference between a happy customer and a disgruntled one (which isn’t something anyone wants in today’s on-line era), let alone the profit impacts. If you are interested in an alignment assessment, please contact us.

 

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Global Manufacturers Struggle to Keep Up with Demand – Are You?

January 17th, 2018

Supply Chain Briefing

According to an Industry Week article, factories across the globe are showing signs of strain in keeping up with demand. China, Germany, France, Canada, the UK and the US all show that capacity might not be keeping up with supply. In fact, the U.S. reading from IHS Markit has reached its highest level since March 2015. Inflationary pressures are surfacing.

Are You Prepared?
This certainly coincides with what we are seeing in the market – if you aren’t preparing in advance, you are likely to be left in the dust. Customers are unwilling to wait or dampen their experience. They’ll find someone who can meet their needs. Are you prepared to meet your demand – and your competition’s?

Details and Planning
I used to work in a paper mill and converting operation like the materials pictured above. Meeting demand is far reaching – just think about the space constraints in storing these materials? Success follows forethought and preparation.

What Should We Consider and/or What Impacts Could Arise?
Do you know your capacity? It certainly seems appropriate to start by understanding your machinery and equipment capacity, your labor capacity, your storage capacity and your suppliers’ capacity to name a few. How much can you increase your volume without running into a wall? 5%, 20% or 50%?

Driving Profitable, Scalable Growth
One of the issues we partner with clients to address is how to drive profitable, scalable growth. Keeping up with growth is one question.  However, perhaps a more important question is whether you can sustain growth and have a scalable infrastructure.

Do you have the people, development programs/skills, processes and technologies in place so that you can grow without adding people at the same rate as your growth?

First of all, with virtually 0% unemployment, it will prove challenging to find good people. Next, even if you are able to find them, think about your ramp up curve for effectiveness. In most manufacturing environments, it can be 3 months to a year to bring a higher-skilled resource up the learning curve. Also, have you thought about what your customers expect in 6 months to a year? Don’t think about their current needs; look beyond if you plan to be their partner in growth.

So the question remains, are you prepared?



Why Customers Rule

September 28th, 2016

supply chain

Last weekend, I attended APICS 2016 in Washington DC, and one of the keynote speakers was Bill McDermott, SAP’s CEO (pictured below with Abe, APICS’s CEO). He gave a motivating talk about a variety of topics. One of the key themes is that customers (consumers) rule! And, if you think about it, one set of customers includes your employees. Thus, you need to know what both think and want!

One of his stories from his younger career is when he was sent to lead the worst performing division of Xerox. Listening to his employees and customers turned it from last to first in one year. Talk about powerful!

Bill McDermot SAP CEO

In essence, all businesses should be concerned about what their customers – both up and down the supply chain (including consumers) — want. The better understanding you have of demand, the more successful you’ll be in exceeding expectations — with the opportunity to do so at the lowest cost, driving win-win profit.

One tip to implement this week:

So, this week, start asking your customers and employees what is important to them. You might not even have to open your mouth — start listening to what is said AND what isn’t said. I guarantee you will learn something new that could prove invaluable. Look for win-win opportunities. How can you make sure they become raving fans without spending a dime?

Once you talk with a group of customers, look for trends. What do you see and hear? And, how about your employees (and peers)? I’ve yet to meet a client with happy customers and unhappy employees. What does that tell you?

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”



Lean or No Lean, a Demand Plan is a MUST

June 16th, 2016
demand plan

Demand planning delivers such useful information on client demand that even Lean devotees will find data on longer-term forecasts, seasonal products and trending patterns useful.

Whether you are on the Lean journey or not, you need a demand plan! Prior to forming LMA Consulting Group, I was a VP of Operations and Supply Chain for a mid-market manufacturer. Our Board hired a lean consultant who insisted we had to be purists – there is no in-between. If we were to embrace lean (and, who wouldn’t want to be lean, after all?), there are some lean purists who say “no need for a demand plan”. Somehow, this is what was adopted as gospel at my company; however, it was NOT accurate — assuming you wanted to service customers. From this frustrating experience along with several others in working with clients, it is apparent that the demand plan is not dead!

If we take it back to the basics, I have to wonder why anyone would ever think they didn’t need a demand plan. In essence, it is like saying you don’t need to know what you’re likely to sell, use, and transfer to other facilities.  Why wouldn’t we want to understand this information? Well, the lean purists would say kanbans are connected directly to customer demand and pulls it through. Certainly that is a successful way of planning in many organizations and for “A” products especially those with those with relatively even demand.  However, it doesn’t mean you wouldn’t want a good feel for your demand. It is always helpful to provide longer-term forecasts to suppliers and to use internally for staffing, skills building, etc.

And, when it comes to B and C items, seasonal items and other trending patterns, understanding the demand plan isn’t a “nice-to-have”; it is critical to success. We estimate that at least 80% of our clients can gain significant bottom line results from focusing a bit more attention on the demand plan.  If you are interested in discussing further, contact us.

 

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