Internal Factors

● Past demand and sales

● Price policy

● Delivery performance

● Quality and perceived quality

● Logistics and manufacturing costs

● New product launches, delists

● Product life cycle stage

● Sales and marketing activities

● Promotions, campaigns

● Ads, ATL, BTL advertising, etc.

● Social media activities

● Management quotas and targets

External Factors

● Existing, new and potential customers

● Seasonalities, important days/weeks

● Weather, global warming, natural events

● Changes and trends in prices

● Market growth

● Economic growth

● Competitors' products, prices

● Competitors' new products

● Delivery performances of competitors

● Competitors' sales & marketing activities

● Customers' satisfaction, preferences

● Customers' investments, plans, actions

● Activities of customers' competitors

● Activities of customers' customers

● Large projects

● Tenders, wholesales

● Raw material, commodity prices

● General logistics & manufacturing costs

● Political, cultural factors

● Exchange rates

● Standards

● Legal regulations

● VAT, SCT, PPI, CPI, etc. rates

● Epidemics, pandemics, natural disasters

What are the competitive advantages of planning demand?

Organization that plans its demand better than competition will be able to more effectively organize its supply chain operations (especially manufacturing and purchasing), offer their customers sooner and more reliable due dates, meet or exceed committed service levels, expand market share, product and customer portfolio due to their pricing and cost advantages, and increase overall competitiveness.

In this context, the demand planning process can be considered among critical prerequisites of an organization's sustainable profitability goals.

Majority of companies facing problems

in production or material planning,

actually have problems in planning their demand.

How to forecast demand, how to generate forecasts?

A systematic approach should be followed when designing demand planning processes within an organization. The process may require customizations specific to the organization's needs.

In general, the following roadmap may be implemented.

1. Defining the process and its objectives

The importance of the demand planning and sales forecasting process for the organization, its place in supply chain planning, inputs, outputs, objectives and performance indicators are determined.

2. Determining forecasting levels and units

Organizations may choose to forecast at different product levels such as SKUs, product groups, families, categories, brands, etc. Groupings may also be formed based on locations, regions, customers, customer segments, etc.

3. Deciding temporal process parameters

Temporal decisions, such as how to choose forecasts horizons and periods within this horizon, how often to update forecasts, play an important role in structuring the demand planning process.

It is important to decide when NOT to forecast

and what NOT to forecast

4. Collecting and preparing data

Collecting demand or sales data of past periods, cleansing these data, determining the influential factors in the past, and enriching the data with historical events are done. Therefore, data and information inputs for generating demand forecasts become ready to use.

5. Analyzing data and choosing forecasting method

Visualization of data as graphs aids the forecast analysis and selecting the appropriate methods. Statistical or judgmental methods are used to generate forecasts. These methods should be appropriately integrated into the process, and the performance of chosen methods should be monitored.

6. Incorporating forecasts into organizational planning processes

Demand Planning (DP) is subject to planning activities designed within the scope of processes such as Budgeting, Sales and Operations Planning (S&OP/IBP), Supply Chain Collaboration (CPFR), Strategic Business and Investment Planning, etc. Adjustments on demand forecasts are also likely at these stages.

7. Improving demand planning and forecasting process

The overall performance of the process is evaluated, suggestions and feedback are collected and process improvements are done, when necessary.

What are demand forecasting methods?

Demand forecasting methods are grouped into two main groups:

1. Judgmental methods are formed based on the knowledge and experience of managers, employees and experts.

2. Statistical methods create forecasts based on statistical methods and numerical calculations.

Some examples to statistical methods are listed below.

 

Statistical Forecasting Methods
Averaging Methods ● Simple Averages ● Simple Moving Averages ● Weighted Moving Averages   Smoothing Methods ● Exponential Smoothing (ES) ● Holt's Method (double ES) ● Adaptive Exponential Smoothing     (adaptive ES) ● Winter's Additive Method     (additive triple ES) ● Winter's Multiplicative Method     (multiplicative triple ES)	Regression Methods ● Simple Regression ● Multiple Regression   Others ● Moving Medians ● Seasonal Indices ● Decomposition Analysis ● ARIMA, ARIMAX ● Bass Method ● Croston Method

Company X does that, let's do the same...

Is demand planning same for every organization?

There are some basic methods in demand planning that are applicble to every organization. Particularly, standard spreadsheet software can be used to generate basic statistical forecasts.

However, issues and concerns like sales and marketing strategies, management of products or brands, manufacturing strategies, supply chain operations and relations, nature and patterns of customer demand, interpretation of past data, modeling of future actions and assumptions are not the same for every organization. Therefore such issues and concerns need to be considered from an organization-based, specific perspective.

In order to to plan for long-, medium- and short-term demands, organizations generate long-, medium- and short-term forecasts. These forecasts and plans are later used in capacity, manufacturing, purchasing, etc. planning processes.

Due to aforementioned concerns and reasons and may be many more, demand planning process systematics should be custom- or tailor-made for the organization.

Optimum Planlama provides consultancy services on designing and reengineering organizational Demand Planning processes, as well as supporting tools.

Contact us for more information on our consulting services regarding design and implementation of Demand Planning processes and related tools.

What are the long-, medium- and short-term forecasts?

Organizations should have the capacilities to generate forecasts at different periods, horizons and details within their demand planning processes.

Long-term forecasts are strategic with a 2 to 10 year horizon, usually generated in terms of total sales quantities, and are used in strategic business and investment planning decisions.

Medium-term forecasts are generated for groups of products (or services) over 12 to 24 months planning horizons. These forecasts are used in determining aggregate sales quantities and revenue projections and, in turn possible bottlenecks in operations (purchasing, manufacturing, warehousing, logistics, etc.) and financials cash flows. Demand plans and forecasts at this tactical level are generated within the context of Budgeting and/or Sales and Operations Planning (S&OP/IBP) processes.

Short-term forecasts are detailed forecasts produced generated in terms of end- or semi-finished products to be sold in a 3 to 6 months horizon. They are used to determine operational plans related to purchasing, production, warehousing, allocation or transportation.

In addition to values added by the Sales and Operations Planning process inside the organization, processes such as Collaborative Forecasting, Planning and Replenishment (CPFR) lead the way to supply chain excellence, through sharing forecasts and information among supply chain members.

Demand Planning and Sales Forecasting

training program (V4.0EN)

Training Goals

Forecasting customer demand for products (or services) has profound effects on effectiveness of critical business processes, customer satisfaction and revenue. Generating reliable sales forecasts requires effective demand planning and forecasting procedures.

The main goals of this program are providing necessary knowledge on advanced concepts of demand planning processes and basic practical skills on implementing numerical forecasting techniques.

Verbal presentation, all visuals and printed material are in English.

Click for details.

Target Audience

Demand Professionals

Sales Professionals

Demand/Sales Managers

Demand/Sales Planners

Sales Operations

Account Managers

Marketing Executives

Planning Professionals

Budgeting Responsibles

Logistics Professionals

Supply Chain Planners

Product Managers

Customer Relations
 

Day 1:

Forecasting Mechanics,

Basic Methods and Accuracy

Day 2:

Advanced Methods

and Process Improvement

What are the Factors Affecting Sales and/or Demand?

Who Generates and Uses Forecasts?

Process Mechanics: Horizons, Periods and Frequency

Forecast Pyramid, Group and Detail Forecasts -DFUs

How to Formalize the Forecasting Process?

Long, Medium, Close-Term Planning Processes

In-Class Exercises

Forecasting Stationary, Trending and Seasonal Demands

Sales and Operations Planning, S&OP/IBP Process

Product, Demand and Supply Planning in S&OP

Budget Gap Analysis, Demand Prioritization

Supply Chain Collaboration, CPFR

Forecast Accuracy, Basic Indicators
In-Class Exercises

Quality of Data, Data Cleansing

Moving Averages, Medians, Weighting

Modeling Nonlinear Trends

Decomposition of Trends with Seasonality

Multiple Regression, ARIMA Models

Exponential Smoothing, Holt-Winters, Pegel Classification

In-Class Exercises

Lost Sales, Events History, Enriching Data

Assumption Management, Top-Down, Bottom-Up, Middle-Out

Product Entries/Exits, New Products, Life Cycles

Intermittent Leads, Promotions

Determining Safety Stock Levels

Forecast Accuracy, Advanced Indicators

In-Class Exercises 

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Knowledge

S&OP/IBF Brief Demand Planning Brief Production Planning Brief  

Education and Workshops

Sales and Operations Planning, S&OP/IBP Demand Planning and Sales Forecasting Production Planning & Detailed Scheduling Purchasing, Warehouse & Inventory Principles of Supply Chain Management

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