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The Common Pitfalls of Demand Planning

Effective demand management is critical to the financial performance and health of an organization. However, to be successful companies must overcome the common pitfalls that have evolved from decades of insufficient demand planning and management.

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This is an excerpt of the original article. It was written for the December 2018 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2018

It’s December and time once again for our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. As with years past, we’re also featuring several articles we trust will offer food for thought in your supply chain in the coming year.
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Effective demand management is critical to the financial performance and health of an organization. Demand management is boundary spanning and, as such, needs to be independent of the functional management organization. When we refer to demand management, we are referring to every functional group within the organization contributing to and relying on managing demand. Digitization and digitalization offer the promise of digital collaboration across functional silos and organizational boundaries without significant manual interaction. However, to be successful companies must overcome the common pitfalls and archetypes that have evolved from decades of insufficient and siloed enterprise demand planning and management. Let’s take a look at the four most common pitfalls of demand planning.

The Problem: The traditional supply chain view is linear and disconnected Pitfall No. 1: Lack of an organizational commitment to improved demand planning
• Organizational culture has been conditioned to the “forecast is always wrong.”
• Lack of executive commitment to integrated demand/supply planning:
– demand planning resides in functional silos with a bias to functional metrics; and
– demand planning led by middle managers supported by junior analysts.
• Operational demand planning is supply chain focused and forecast oriented.

We traditionally view the supply chain as a chain of sequential links each with behavioral attributes that act separately and together to cause demand variation from historical performance. This has been widely characterized as the bullwhip effect. As demand variations are communicated sequentially through the supply chain there are time delays and amplification of the signal variations that cause error to propagate the network (see Figure 1).

Effective demand management is critical to the financial performance and health of an organization. Demand management is boundary spanning and, as such, needs to be independent of the functional management organization. When we refer to demand management, we are referring to every functional group within the organization contributing to and relying on managing demand. Digitization and digitalization offer the promise of digital collaboration across functional silos and organizational boundaries without significant manual interaction. However, to be successful companies must overcome the common pitfalls and archetypes that have evolved from decades of insufficient and siloed enterprise demand planning and management. Let’s take a look at the four most common pitfalls of demand planning.

The Problem: The traditional supply chain view is linear and disconnected Pitfall No. 1: Lack of an organizational commitment to improved demand planning

  • Organizational culture has been conditioned to the “forecast is always wrong.”
  • Lack of executive commitment to integrated demand/supply planning: -demand planning resides in functional silos with a bias to functional metrics; and -demand planning led by middle managers supported by junior analysts.
  • Operational demand planning is supply chain focused and forecast oriented.

We traditionally view the supply chain as a chain of sequential links each with behavioral attributes that act separately and together to cause demand variation from historical performance. This has been widely characterized as the bullwhip effect. As demand variations are communicated sequentially through the supply chain there are time delays and amplification of the signal variations that cause error to propagate the network.

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From the December 2018 edition of Supply Chain Management Review.

December 2018

It’s December and time once again for our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain…
Browse this issue archive.
Access your online digital edition.
Download a PDF file of the December 2018 issue.

Download Article PDF

Effective demand management is critical to the financial performance and health of an organization. Demand management is boundary spanning and, as such, needs to be independent of the functional management organization. When we refer to demand management, we are referring to every functional group within the organization contributing to and relying on managing demand. Digitization and digitalization offer the promise of digital collaboration across functional silos and organizational boundaries without significant manual interaction. However, to be successful companies must overcome the common pitfalls and archetypes that have evolved from decades of insufficient and siloed enterprise demand planning and management. Let's take a look at the four most common pitfalls of demand planning.

The Problem: The traditional supply chain view is linear and disconnected Pitfall No. 1: Lack of an organizational commitment to improved demand planning

  • Organizational culture has been conditioned to the “forecast is always wrong.”
  • Lack of executive commitment to integrated demand/supply planning: – demand planning resides in functional silos with a bias to functional metrics; and – demand planning led by middle managers supported by junior analysts.
  • Operational demand planning is supply chain focused and forecast oriented.

We traditionally view the supply chain as a chain of sequential links each with behavioral attributes that act separately and together to cause demand variation from historical performance. This has been widely characterized as the bullwhip effect. As demand variations are communicated sequentially through the supply chain there are time delays and amplification of the signal variations that cause error to propagate the network (see Figure 1).

Effective demand management is critical to the financial performance and health of an organization. Demand management is boundary spanning and, as such, needs to be independent of the functional management organization. When we refer to demand management, we are referring to every functional group within the organization contributing to and relying on managing demand. Digitization and digitalization offer the promise of digital collaboration across functional silos and organizational boundaries without significant manual interaction. However, to be successful companies must overcome the common pitfalls and archetypes that have evolved from decades of insufficient and siloed enterprise demand planning and management. Let's take a look at the four most common pitfalls of demand planning.

The Problem: The traditional supply chain view is linear and disconnected Pitfall No. 1: Lack of an organizational commitment to improved demand planning

  • Organizational culture has been conditioned to the “forecast is always wrong.”
  • Lack of executive commitment to integrated demand/supply planning: -demand planning resides in functional silos with a bias to functional metrics; and -demand planning led by middle managers supported by junior analysts.
  • Operational demand planning is supply chain focused and forecast oriented.

We traditionally view the supply chain as a chain of sequential links each with behavioral attributes that act separately and together to cause demand variation from historical performance. This has been widely characterized as the bullwhip effect. As demand variations are communicated sequentially through the supply chain there are time delays and amplification of the signal variations that cause error to propagate the network.

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