Not all customers are the same; one size does not fit all. Market segmentation, led by sales and marketing, allows your organisation to recognise and anticipate different customer needs. But segmentation is not just about responding to the varying needs of consumers today. It’s about anticipating long-term trends, thinking ahead of the game and predicting what customers want, even before they do, so there is time to respond and align your firm’s business model and supply chain, accordingly.
Gathering insights and intelligence, and monitoring change should be a continual process. Whilst your business may have identified customer segments today, as more insights, trends and developments emerge, your business strategy needs to reflect this.
Integrated Business Planning can provide the fundamental integration required between the product, demand and supply teams as well as the maturity in business processes needed to advance segmentation to truly reap its benefits.
2. Customer Collaboration
Customer collaboration can bring substantial benefits to both your business and your customer. Better communication, visibility and information flow between the different links in the supply chain is essential. Your company will need to develop strategic relationships with customers and suppliers alike and collaborate to create an efficient, lean supply chain, and ultimately, competitive advantage.
For true collaboration, work on change with your partners for mutual benefit and respond as a supply chain, driven by the customer value experience. Listen to the voice of the consumer via the sales team, and collaborate with your supply chain partners to model and optimise the product portfolio.
Collaboration is a journey of maturity, which doesn’t actually start with collaboration itself. It begins with equal capability around core business process activity, before moving on to partnerships, and then eventually on to collaboration. The process begins with collecting and exchanging and then integrating data to ensure you have co-managed data and inventory.
The next step is to start more trading partnerships and become more aligned from a strategic point of view, so you can understand each other’s important activities. It is from there that your business can move to a truly collaborative place.
It’s a ‘pitch and catch’ situation: you want to know that if you are going to ‘pitch’ a better view of demand to suppliers, that they have the capability to ‘catch’ that information and use it to improve processes back through the extended supply chain.
3. Analytics, Modelling & Optimisation
When your business grows in maturity, with the right tools, people and processes in place, it is then time to look at modelling both potential outcomes and responses to segments, and designing the optimal supply chain to respond to this. By using excellent analytics to model and optimise your business you can create a more effective demand management planning process to reach high performance levels.
The benefits that come from using analytics effectively are considerable. Research proves that organisations using a high level of analytics are twice as likely to be top financial performers, because their decision-making is three times more effective, and they make decisions five times faster. Advanced analytics can help build strategic models and manipulate data for scenario planning, evaluating the risks and opportunities.
The quality of the demand plan will only be as good as the input it receives. With so much information coming at your business, the appointment of a demand analyst is a sensible move to better interpret analytics and work with the sales and marketing team to highlight the activities required and over what timescale. A dedicated demand analyst will also add a dynamic element to your business. Their review of the situation is continuous, allowing a much greater degree of responsiveness. Investment, impact, consumer reaction and ROI can all be continually modelled and monitored, supplying real-time information to your sales and marketing teams.
Implementing IT tools, which support real-time scenario planning, will not only radically advance the benefits to be derived from your demand management process, they will support knowledge-based segmentation. Oliver Wight has formed a partnership with optimisation technology and prescriptive modelling specialists, AIMMS, and logistics solutions consultancy, Districon, to provide an integrated demand optimisation solution. This allows you to leverage the synergies between people, processes and tools to achieve an advanced level of value.
4. Statistical Forecasting
For most organisations, statistical forecasting has a role to play as part of accurate demand planning. When used as part of an integrated demand management process, it can help anticipate changes in demand well in advance, so your business can respond accordingly.
In many organisations, there is a tendency for an over-dependency on computer-generated forecasts. To assume the computer knows best is a dangerous business. Like blaming the weather forecast for not taking an umbrella out, it’s no good pointing the finger at the computer when there isn’t enough stock to meet customer demand.
One of the most common problems is that organisations consider statistical forecasting to be a non-value-added administrative process for the IT department to manage. Of course, the
IT department has little or no knowledge of the broader business in order to apply any interpretation
of the data. And, without the intelligence, the forecast is just a number. The computer really doesn’t know something you don’t; applying intelligence is vital. It is the sales and marketing teams that are able to make sense of the data by scrutinising and challenging it.
Statistical forecasts must be based on demand history and managed correctly to reflect real demand. What is the impact of new product introductions, seasonal variations, and promotions on demand? Trends, seasonality and event-based forecasts will also need to form part of the forward demand plan.
While tools have become increasingly sophisticated, they can never provide the overriding output for effective demand planning. Without applying intelligence, data is but a number, and a potentially dangerous one at that. When led by sales and marketing, and integrated across your organisation - with the correct models applied to suit the business, its products, and markets - statistical forecasting can provide a powerful baseline on which to create future plans.
5. Demand Plan Consolidation
It is vital your demand planning process links with your business, sales and marketing strategies, so you can identify and bridge any performance gaps.
Integrated Business Planning allows monthly updates to plans. The monthly demand review process (one of five monthly Integrated Business Planning reviews) acts as the management control for demand management, ensuring sales and marketing strategy and activities are aligned, and continue to align, with the overall business strategy.
Integrated Business Planning provides a 24-month rolling horizon and bottom-up realistic plan. Supported by documented assumptions, risks, issues, opportunities and metrics, from multiple inputs (including customer insights, sales activities and statistical projections), the resulting demand plan recognises the inevitability of uncertainty and takes conscious steps to manage it.
6. Demand Execution
Demand execution requires your organisation to ‘sell the plan’, optimise execution and do what you said you would. Demand execution changes as the organisation matures, from a demand ‘free-for-all’ in immature businesses, to demand optimisation in the most mature, where tools play an important role in providing an agile and dynamic response to short term demand changes; a response measured in minutes, rather than days.
The first step is to take control of the short-term by putting an effective demand control process in place, aligning it with people and behaviours. Demand has to be managed based on what you have the ability to supply in the execution period. It is of course in the short-tem execution zone constrained by supply.
Once a business matures and has the right skills, behaviours and processes in place to provide control and stability, you can then optimise the supply chain by introducing appropriate tools. Automating the management of orders and exceptions can speed up the process tremendously. But to achieve this you not only need to implement some good systems around demand fencing, but take the knowledge from your people and apply it to the system.
With the right tools, people and processes in place your business can optimise further. To be really good at demand execution, you need an advanced planning process. That means running the master supply schedule more regularly - daily and maybe even hourly, rather than weekly or monthly - allowing far greater responsiveness. It also requires the development of customer partnerships, a prerequisite to which, of course, is good planning and thorough understanding of the market.
7. Implementation - the proven path
Getting your demand management right will deliver significant value for your organisation. An effective demand management process managed and led by the sales and marketing teams, is essential in driving competitive advantage. A good demand plan can only be derived with input from a cross-section of the organisation, a 24-month plus horizon in mind and regular updates.
Drawing on decades of experience, the Oliver Wight Proven Path explains the keys to successful implementation and development of your process - and how to go about achieving them.
8. Demand Management Maturity Self-Assessment Tool
How mature is your demand management process?
Find out using our Demand Management Maturity Self-Assessment Tool
Complete a series of multiple-choice questions to assess the current maturity level of your demand management process. Once you have submitted your answers, you will receive an instant online overview report of where your business lies relative to the Oliver Wight Demand Maturity Model. Your report will also be sent to your email address, and is downloadable from this website.
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