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The dark arts of planning...

by Alastair Pennie

Demand and supply planning

It’s clear the planning process has become the cornerstone of most supply chain businesses in Australia with warehousing, distribution, and manufacturing often outsourced or offshored.

"Demand and supply planning remains largely misunderstood, sometimes other key drivers of the business such as sales, marketing and finance do not even know about the roles".

The vast majority of people in this space have ‘fallen’ into their planning roles and I’m yet to find the long queue of graduates leaving university desperate to become a demand planner!

Understanding the ‘dark arts’ of planning is further complicated by jargon used to depict the key stages of planning maturity.

Demand planning, supply planning, forecasting, S&OP, IBP, ITP… The list goes on but for clients recruiting in this space and talent progressing in careers in supply chain, what do you really need to know?

I won’t go into the intricacies of planning (contact the likes of Oliver Wight for training or help with supply chain planning) but hopefully I can clear up the terminology and what you should ask and look for when enhancing your supply chain performance.

Planning

Essentially, planning should increase ‘delivery in full on time’ (DIFOT) in order to improve customer service and minimise inventory holding to improve cash flow. It boils down to the tension between the ‘just in case’ view from sales and marketing and the ‘just in time’ view of supply chain.

Poor planning can dramatically affect the bottom line of a business. For example, I regularly meet sophisticated S&OP practitioners that have removed millions of dollars from a supply chain by reducing things like air freight and obsolete stock. It is clearly harder to generate this improvement to the bottom line through sales.

Forecasting

Basic forecasting is an analytical role, which requires manipulation of data from sales history and extrapolating trends in current performance; for a business with few SKUs and a consistent sales volume, this is sufficient. These businesses don’t need an S&OP expert, a whiz on excel is potentially all they need to add value.

Demand Planning

Demand planning is required if the SKU volume increases or sales are changing through market forces or marketing influence. This role, whilst analytical, needs also to understand sales and marketing behaviour and link that to capacity of product availability.

This role is more commercial and requires stronger stakeholder management skills. From a maturity level, this is where most businesses sit and it really affects the three month horizon of planning. Too many businesses try to implement S&OP without getting this stage correct, and too many times I get asked for S&OP experience when demand planning isn’t working effectively. S&OP needs to work alongside tactical planning with the former focused in 12-24 month planning horizons and the latter continuing to drive demand planning on the 0-3 month horizon.

If you are lucky enough to work in a mature planning environment, you will see a rigorous process, normally on a monthly basis, with four weekly meetings that use accurate data, engagement with sales, marketing, manufacturing and finance with the collaboration to drive to “one number”, that aligns to the overall business strategy.

Talent Acquisition

Talent at this level must have past experience and a commercial mind-set. They must be able to step away from numbers in a spreadsheet, engage cross-functionally and interpret market trends to make intelligent planning decisions. These people are extremely rare so it can be a great space to progress your career.

If you are recruiting in this space, ensure you are clear on what stage your business is in, how complex your planning process is and then hire accordingly. Talent with strong S&OP experience are unlikely to move to a business with a basic planning process unless there is executive level commitment to go through the S&OP journey. Similarly, if you’re looking for a role in this space, don’t expect to get an advanced planning role unless you can demonstrate strong engagement skills as well as analytical capability. Finally a lot of businesses get hung up on systems – for a tactical role this can be important but is of much lower priority for a strategic role where developing a relationship and accessing the right data from the right stakeholders is key.

Hopefully I’ve highlighted and cleared up some of the challenges in recruiting within supply chain planning but If you are interested in understanding where you sit on the maturity curve, the benefits associated with improvement and what is required to move your organisation to a more advanced level, we have partnered with Oliver Wight to offer a free session to expand on that area. Get in touch and I can provide more detail.

Al Pennie - New

Alastair Pennie

Director - Supply Chain NSW

02 8024 7141