At least 80% of clients contact us to find out how to predict the unpredictable. This is especially true in custom manufacturing, high growth and promotion-heavy industries; however, it remains accurate across the broad spectrum of manufacturing and distribution companies. Predicting the unpredictable demand plan starts by asking common sense questions, building the demand plan, and incorporating it into the SIOP (Sales Inventory Operations Planning) process. 

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Predicting the Unpredictable

Every client believes their demand cannot be predicted. Customers are unsure with the volatility and uncertainty in the supply chain. Sales teams are optimistic and either forecast too much, hoping Operations will produce and store “just in case” or provide high level dollar forecasts but have no idea which geography it will be sold from, or which product grouping will be sold. Market conditions evolve at a rapid pace with changing business conditions. New Product Development is racing to keep up with evolving demands and determine if historical patterns will remain intact for similar products. So, how can we predict the unpredictable and create a demand plan?

Clients are frequently calling to figure out how to predict the unpredictable. In essence, they want to estimate what is likely to sell and ensure that the forecast can be fulfilled successfully and profitably. There is no off-the-shelf solution to achieving success in predicting the unpredictable. Our most successful clients start with a dose of common-sense questions. Our custom manufacturing clients require specialized demand planning solutions to predict the unpredictable.  

Common Sense Questions

From a best practice point-of-view, start building a SIOP/ S&OP process (sales, inventory & operations planning) with an emphasis on the forecast or demand plan. Start with the customer in mind.

  • Current status: What is happening in your customers’ supply chains?
  • Scalability: Are your customers well-positioned to take volume during the supply chain chaos or are they more likely to suffer?
  • Historical Sales: What have been their historical growth rates? Will those continue or were they simply situational?
  • New Products: Are your customers asking about new products and services? Are they staying up-to-speed on what’s needed to support changing requirements?
  • Customer agreements: Do you have customer agreements and/or inventory agreements? Should you change them to be tailored to the current situation?
  • Customer visits: Is there an opportunity for joint customer visits?
  • Quotes: Do you have quotes? How are the trends?
  • Engineered product: If a highly engineered product, what is in common?
  • And keep thinking…..

Develop a Demand Plan

Start with whatever is known, add insights based on the commonsense questions, and run the revenue forecast by key stakeholders. Do they think it sounds feasible? Don’t worry about details. Think in terms of customers or customer groups, product lines and / or markets. Do NOT get lost in spreadsheets and numbers and lose sight of the big picture. How does the result compare with expectations, competition and common sense? For most clients, start with a 12-month rolling forecast at the high level, beginning with historical sales trends. Add exceptions such as promotions, new products, new programs, quotes, sales feedback, etc. Don’t get sidetracked with the feasibility to deliver, resource requirements and inventory levels. Stick to demand. You’ll address later with the capacity side of the SIOP process. If you’d like to learn more about demand planning / sales forecasting, refer to our services webpage.

Incorporate the Demand Plan into Monthly Review Cadence

Review your demand plan as a part of your monthly SIOP/ S&OP (Sales Inventory Operations Planning) process. Gather inputs from Customer Service, Sales, Program Management, Product Managers, Marketing and whoever touches the customer. Continually refine the forecast from a directional point-of-view. If you are chasing pennies, don’t bother. Spend 80% of your time on the 20% of your customers and products that will drive a directionally correct forecast on a rolling 12-month basis. You’ll have an opportunity to update the forecast monthly with exception processes built in for extenuating circumstances. To learn more about demand planning and SIOP best practices, refer to our ebook, “SIOP: Creating Predictable Revenue and EBITDA Growth“. If you are interested in talking about what it would take to purse the demand planning and SIOP journey in your business, contact us.

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