Communicating demand rests on several principles of effective communication:
Communicate soon to minimize surprises
- Communicating soon to minimize surprises is the principle that information communicated promptly is of far greater value than delayed communications for any reason. This is true for both good news as well as for information that is still uncertain.
- Developing a culture that reward early sharing of good and bad news could improve demand communications significantly.
Structure communications to ensure that they occur
- Structuring communications to ensure that they occur means that communications cannot be taken for granted.
- A structured process must be more than just assuming that transactional data will be forwarded along by organizations information systems.
- While data automation has freed an organization professionals from spending all their time on this level of communications, technology is no substitute for interpersonal relationship and consensus building.
- Person-to-person interaction is needed when setting priorities, explaining nuances, and resolving conflicts.
The following picture shows communication structure for communicating demand:
- Starting with demand plan inputs, communications occur in both directions regarding inputs, including assumptions and uncertainties.
- During the consensus review, a key communication step is to challenge and validate assumptions and to acknowledge uncertainties.
- The result of this process is a consensus demand plan that is integrated with finance plans and supply plans during the sales and operations planning process.
- Communications in the S&OP process of reconciling and synchronizing plans must be structured so that all parties consistently feel listened to and understand the rationale behind the consensus numbers.
- Communications can lead to greater buy-in and commitment to action that will be needed to realize the plans.
- An output of the S&OP process is that the supply side of the organization uses the consensus numbers to perform master scheduling and supply planning.
- Finally, monitoring performance and providing feedback is a communications process that links to demand-influencing and prioritization activities, to master scheduling and supply planning, and to the S&OP process itself.
- One way to ensure that these communications occur and feedback is used to keep the plans realistic is to rely on a full-time demand manager.
Demand manager is an organizational position that is responsible for:
- Gathering information on demand volume and timing by product, product family, and/or customer segment.
- Performing analytical work on the data and the demand plan.
- Building consensus on a demand plan.
- Communicating demand information to and from the various stakeholders involved in input, planning, execution, monitoring, and revision of the demand plan.
- The demand manager may also play a lead role in the S&OP process, for example, by creating various scenarios of demand for supply and finance in an effort to tie the demand plan to the business goals.
- A best practice is to have this be a full-time position because of the importance and multifaceted nature of the responsibilities.
- The demand manager is at the center of communications because this position serves as an intermediary between supply and demand organizations areas.
- The demand manager is the recipient of feedback from the demand side of the organization regarding whether their demand-influencing or prioritization efforts occurred as planned or produced less or more demand than was planned for.
- When actual demand varies from plan, the demand manager could request additional influencing or prioritization efforts or start the process of altering supply, demand, or financial plans as needed.
- When demand is less than was planned for, the demand manager informs the supply organization so that they can alter the supply plan to keep supply and demand as synchronized as is feasible given the costs to change ongoing operations.
The following picture shows the use of a demand manager as a communications focal point:
Focus communications to fit audience
- Being effective in communicating demand requires ensuring that the right individuals receive timely communications regarding changes in demand or the results of demand-influencing and prioritizing activities.
- Information must be disseminated to fit the needs of the person receiving the information, such as providing demand data in dollars for finance but in units for operations.
- Focusing communications also requires that each person receives just the information he or she needs to make an informed decision.
- A key tool to help focus communications to fit the audience is to use dashboards, which are software presentations of key information from the organizations information systems.
- Dashboards can be tailored by each user to show just the key performance indicators and information useful to that person.
The following elements are important to include in demand dashboards for demand consensus review:
- Historical demand data for the past three months or more, with relevant key performance indicators and metrics for each month.
- Demand plan for next 18 months or more.
- Prior demand plan.
- Assumptions made in demand numbers and pricing assumptions.
- Planned branding, marketing, and sales promotions activities.
- Key risks, opportunities, economic trends, and competitor actions.
- Nuances and uncertainties.
- Events and issues of note and decisions that were made.
Collaborative demand communication
- Supply chain managers can counteract supply chain demand variability such as the bullwhip effect by communicating demand effectively to all parties in the supply chain. On a basic level this involves order processing.
- Order Processing is the activity required to administratively process a customer’s order and make it ready for shipment or production.
From a collaborative demand management standpoint, this may involve producing and forwarding a sales order to the most efficient supply channel:
- An inventory storage location, authorizing the goods to be shipped.
- A production plant, authorizing production and specifying all information required by the master planner (what, how much and when)
- The demand manager or another demand-side professional may also send a copy of the sales order to the customer to communicate the terms and conditions of the sale. In this way, demand management serves as a n intermediary between the customer and production planning.
- Organizations can also use information-sharing tools such as collaborative planning, forecasting, and replenishment (CPFR) to find a balance between the desires for centralized supply chain planning to provide network integration and optimization and allowing each local region to analyze its own market from a local perspective. Each regional partner can be encouraged to share this local expertise with the larger network.