AG Barr Proc 1 © The Delos Partnership 2003 Sales Forecasting and Demand Management The process.

AG Barr Proc 1 © The Delos Partnership 2003

Sales Forecasting and Demand Sales Forecasting and Demand ManagementManagement

The process

AG Barr Proc 2 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

Analyze History

Execute Forecast

CaptureHistory

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 3 © The Delos Partnership 2003

1. Capture Actual1. Capture Actual

• Each month we capture Actual History

• Captured from Order Entry Software - shipments

AG Barr Proc 4 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 5 © The Delos Partnership 2003

2. Review Actual 2. Review Actual ShipmentsShipments

Look for unusual shipment, not going to be repeated

Competitor going out of business Unusual promotions Millennium bug Mistake

Beware spike caused by stock outsAug 5035Sept 6040Oct 237 StockoutNov 5750

AG Barr Proc 6 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 7 © The Delos Partnership 2003

3. Execute Statistical 3. Execute Statistical ForecastForecast• Forecast should use history to produce

trends and identify patterns

• Key influences to be detected :– Base– Trend– Seasonality

AG Barr Proc 8 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 9 © The Delos Partnership 2003

Sales Forecasting: InputsSales Forecasting: Inputs

• New Customers• New Products• Pricing Initiatives• Advertising And Promotions• Cannibalisation• Customers Own Forecast• Competitors Activity• External Factors

AG Barr Proc 10 © The Delos Partnership 2003

Sales Forecasting: InputsSales Forecasting: Inputs

• New Customers• New Products• Pricing Initiatives• Advertising And Promotions• Cannibalisation• Customers Own Forecast• Competitors Activity• External Factors

MarketingPlans

AG Barr Proc 11 © The Delos Partnership 2003

Forecast must be Forecast must be supported by Assumptionssupported by Assumptions

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

1254 145 145 156 156 170 170 135 135 135 145 160 160

1345 145 167 135 180 200 200 200 200 150 150 150 200

1256 100 200 200 200 200 200 300 300 200 200 200 200

1347 50 50 50 50 40 40 30 30 20 20 40 50

NUMBERS !

ASSUMPTIONS

AG Barr Proc 12 © The Delos Partnership 2003

WorkshopWorkshop

What are the major What are the major assumptions on which the assumptions on which the forecast is based and whoforecast is based and who

• Creates and owns the Creates and owns the assumptions ?assumptions ?

• Should have visibility of the Should have visibility of the assumptions ?assumptions ?

What are the major What are the major assumptions on which the assumptions on which the forecast is based and whoforecast is based and who

• Creates and owns the Creates and owns the assumptions ?assumptions ?

• Should have visibility of the Should have visibility of the assumptions ?assumptions ?

AG Barr Proc 13 © The Delos Partnership 2003

Management of InnovationManagement of Innovation

Stage/Gate Process

Formal Process for Managing Project

Gate0

Gate0

Gate1

Gate1

Gate2

Gate2

Gate3

Gate3

Gate4

Gate4

Stage 0 Stage 1 Stage 2 Stage 3 Stage 4

Review

Investigate FinancialCase

Develop Test Launch

Forecast Entered intoSystem to drive MRP Mimics

Forecast Reviewed hereFor accuracy

AG Barr Proc 14 © The Delos Partnership 2003

New Product Plan/New Product Plan/Marketing Activity ReviewMarketing Activity Review

•Review Changes toProjects•Highlight Impact on Supply Chain•Communicate changes

AG Barr Proc 15 © The Delos Partnership 2003

0

50

100

150

200

250

300

350

400

450

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Forecast

New Product With Pipeline New Product With Pipeline Fill ForecastFill Forecast

AG Barr Proc 16 © The Delos Partnership 2003

Integration with Supply Integration with Supply ChainChain

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

Cumulative Lead TimeCumulative Lead Time

Insert NewProducts Here

Insert NewProducts Here

AG Barr Proc 17 © The Delos Partnership 2003

Effect of New Products on Effect of New Products on Old ProductsOld ProductsCannibalisation

Definition: The impact (usually negative)of sales on old product from new product– Assess the impact:-

• Timing• Volume• Finance

– Review impact on run-out of old product – Product Life cycle effect

– Review close-outs

AG Barr Proc 18 © The Delos Partnership 2003

Effect of New Products on Effect of New Products on Old ProductsOld Products

Item Jul Aug Sep Oct Nov Dec Jan Feb Apr

12453Old

100 120 115 80 20 10 20 5 0

12468New

120 90 70 85 130 150

Total 100 120 115 200 110 80 105 135 150

Pipeline Fill

“Last Time Buys”

AG Barr Proc 19 © The Delos Partnership 2003

Review Impact of Review Impact of Promotional InitiativesPromotional InitiativesWhat do you need to know ?

PRICE INCREASE/PRICE DECREASE:– When will it happen?– Which SKU’s price will increase?– What is the % increase/decrease?

2 for 1 PROMOTION:– When will it start?– When will it finish?– Which SKUs will be included?– What is the % decrease?– Is this for every customer?

NATIONAL PROMOTION:– When will it start?– When will it finish?– What sort of promotion is it?– Which SKUs will it be?– How much will sales increase against

normal sales rate?– Will all customers take it?

Needs

Formal

document

AG Barr Proc 20 © The Delos Partnership 2003

Demand Creation & Sales Demand Creation & Sales PlanningPlanning

ADVERTISING AND PROMOTIONS

The planning of the promotioncan be precise

The impact of the promotionis imprecise

Assumptions need to be recorded Assumptions need to be recorded

AG Barr Proc 21 © The Delos Partnership 2003

Promotional Curve Promotional Curve AnalysisAnalysis

Effect of Promotion

-40

-20

0

20

40

60

80

100

120

140

1 2 3 4 5 6 7

Month

Unit V

olu

me

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Ind

ex

Hist

Prom

Curve

AG Barr Proc 22 © The Delos Partnership 2003

Get Input From Customer’s Get Input From Customer’s PlansPlans• Will require understanding of Customers

Plans

• Needs effective Sales Planning Process

• May be linked into Customer Replenishment Planning Process

AG Barr Proc 23 © The Delos Partnership 2003

COLLABORATIVE PLANNING - COLLABORATIVE PLANNING - PROGRESSPROGRESS

Data Exchange

Vendor Managed Inventory

Co-ManagedInventory

Trading Partnership

Integrated Planningand Replenishment

•Ability to view customer data•No management process•Possibly available on Internet

•Agreed process for managing inventory (VMI) – supplier’s problem!

•Supplier schedules provided

•Agreed process for managing inventory•Mutual availability of data and plans in joint systems•Supplier schedules provided, and forecasts provided.

•Mutual sharing of long term plans•Full briefing on long term strategy•Joint improvement activities

•Joint forecast review•Joint agreement on business plans and inventory strategy

•Joint improvement activities

Time

AG Barr Proc 24 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 25 © The Delos Partnership 2003

Sales Forecasting – Sales Forecasting – Review External EventsReview External EventsExternal Influence

DEFINITION: Anything outside the business control that affects the forecast

– Government

– Environmental

– Legislative

– Epidemics

AG Barr Proc 26 © The Delos Partnership 2003

Pre-Planned Epidemic Pre-Planned Epidemic ForecastForecast

2 Forecasts Maintained

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9

Month

Volu

me

'Epidemic'

Normal

AG Barr Proc 27 © The Delos Partnership 2003

Sales Forecasting Review Sales Forecasting Review Exceptional DemandExceptional DemandReview large potential business

- Large New Customers- Big new market– New products– Large one time demand

Decide whether to include in forecast or not– Avoid probabilities– Decide on hedging strategy– Agree on acceptance of risk

AG Barr Proc 28 © The Delos Partnership 2003

Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed

AG Barr Proc 29 © The Delos Partnership 2003

Hold Demand Review Hold Demand Review MeetingMeeting

1. Review changes2. Agree assumptions and

changes3. Review products4. Review customers5. Review NPD activities6. Review KPI’s7. Sign off the forecast

AG Barr Proc 30 © The Delos Partnership 2003

Demand PlannerDemand Planner

Strategy

Customer RelationshipManager

Sales and Marketing

SystemForecast

Plan

ManufacturingAnd Purchasing

ERPSystem

Consensus ForecastConsensus Forecast

AG Barr Proc 31 © The Delos Partnership 2003

Typical Role of Demand Typical Role of Demand PlannerPlanner• Co-ordinates External Plan• Responsible for Demand Plan• Review the all of the numbers• Challenge not changes the External Plan• Work with Availability Planner• Works with Sales and Marketing• Influences Customer Service levels• Inputs on Safety Stock policies• Facilitates decision on customer allocation• Manages the Sales Planning system • Manages the Sales Planning process• Enforces good behaviours