Who Uses the Demand Plan and How?
In this video, we discuss who uses the demand plan and how it is used by different teams in an organization. We discuss how the demand plan is used for supply planning, sales and commercial planning, and BU financial planning. We also discuss how the demand plan is used by management review to identify and mitigate risks and leverage opportunities.
The demand plan is a critical document that is used by many teams in an organization. It is used to forecast future demand for products or services, and it is used to make decisions about supply, sales, and marketing.
The demand plan is used by the supply planning team to make decisions about purchasing, manufacturing, and distribution. The sales and commercial team uses the demand plan to forecast revenue and to develop marketing plans. The BU financial planning team uses the demand plan to forecast financial performance.
The management review team uses the demand plan to identify and mitigate risks and to leverage opportunities. They use the demand plan to make sure that the organization is prepared for future demand.
Who uses the Demand Plan? The Demand Plan is the regular heartbeat of a company's direction and strategy and the demand planning forecast is used by several groups in an organization. Supply Planning is the primary user of the demand plan making purchasing, manufacturing and distribution decisions which support the Buy, Make & Sell activities. The demand plan is also used by Sales or commercial teams and BU Finance teams to review the Revenue Outlook for the coming months and current year.
All this is part of an overall Integrated Business Process (IBP) cycle that is finally reviewed by the executives and BU President. Let’s take a closer look at how Supply Planning uses the latest output from the Demand Plan. Supply Planning use the Demand Plan for a range of activities across the full forecast horizon. The Short term horizon is for Deployment planning or how much product to have at different Distribution Centre locations.
This supports the Sell Activity where the Demand Plan is mapped to delivery network options needed to meet demand on time and in full. The Mid Term horizon is for Supply Planning or what and how much product to Make and raw materials to Buy. For the Make activity the Demand Plan is mapped to material availability, resource capacity constraints and business priorities to decide what to manufacture. For the Buy activity, the Demand Plan is analyzed against inventory, material lead times, storage costs and shelf-life to decide what to purchase.
Finally the Long Term horizon is for Capacity planning investment decisions that will support the company's strategic growth. Let’s take a closer look at how the Sales and Commercial teams use the latest output from the Demand Plan. Commercial or Sales use the Demand Plan
for a range of activities, including: 1. Assessing the Revenue Outlook based on the projected forecast for their respective accounts. The demand signal will be used to identify gaps to Budget and develop initiatives to address those gaps and highlight Risks and Opportunities in the latest plan. 2.
Measuring Trade Promotion effectiveness to
answer questions such as: Are consumers just buying early to stock up? Are they moving from other competitor products?
And most importantly: what is the incremental value these promotions are bringing? 3. Measuring and improving their forecast accuracy by analysing promotion effectiveness, removing bias, improving key driver quality by working closely with their selling Partners. Let’s take a closer look at how the BU Financial Planning team uses the latest output from the Demand Plan They use the Demand Plan for a range of activities,
including: 1. Converting the predicted unit volumes to financials which provides crucial outlook into company Revenue, Cost, Profit and Margin. Business performance is usually measured in terms of these metrics. 2.
Understanding and evaluating market share by category in both volume and value and using this insight to manage product and marketing strategies. 3. Reviewing and Updating the Product Portfolio and Lifecycle such as New Product Introductions, Transitions and Delistings to maximise revenue generation & minimize wastage. 4.
Evaluating Marketing Event strategies to determine if the methods for product awareness are meeting the plan, and, if necessary, adopting new marketing methods to close gaps to plan and gain market growth. 5. Once a year, BU Finance use the latest Demand Plan to build the Annual Operating Plan (or AOP) reflecting the company growth strategy for the next year. Let’s take a closer look at how the Management Review uses the Demand Plan as part of the overall IBP cycle.
The Management Review use the latest
Demand Plan to ensure that: 1. Demand & Supply risks are identified and mitigated. Examples of risks could be where the latest forecast predicts significantly reduced sales activity or conversely, where anticipated sales growth cannot be fulfilled due to material or or capacity constraints. 2.
Opportunities are leveraged to maximise growth and meet the company strategy and gain market share. Examples might be deciding build extra capacity or enter a particular market. In summary then, the Demand Plan is the regular heartbeat of a company's direction and strategy and is used by the Supply, Commercial & BU Finance teams to support IBP Cycle.
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