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Red Paper | Study Demand Planning
Excellence in Demand Planning StudyCollaborate to align the business to market demand uncertainty
ContentsExecutive Summary ......................................................................4
Introduction and Importance of Demand Planning ......6 Challenges and Benefits of Demand Planning Excellence ........................................................................................6 Demand Planning Process Chracteristics ..........................7
Survey Participation ......................................................................9
Demand Planning Complexity and Maturity ................. 11
Study Results ................................................................................. 18 Planning Process ....................................................................... 18 Planning Organization ............................................................ 19 Planning Methods .................................................................... 19 Planning KPI‘s ............................................................................. 20 Planning Tools ............................................................................ 21
Outlook and Recommendation ............................................ 22
Disclaimer ....................................................................................... 24
Table of Figures ............................................................................ 25
Contact ............................................................................................ 26
Excellence in Demand Planning StudyPreambleBusiness activities in the globalized market are highly dynamic, and price and innovation pressures require flexible and customer-oriented value chains that are able to respond quickly to increasingly shorter economic cycles. Additionally, the capability of underlying business models and processes must be able to adapt to extreme market volatility. Demand planning has never been more complex. And owing to digitalization, companies have never had so many tools available to them to help with demand planning, such as big data analytics for the mass processing of customer data.
New digital planning tools enable companies to remain profitable by successfully managing the various challenges around the alignment of supply and demand. These tools also aid in avoiding associated risks, e.g., the cost of excessive inventory or lost revenue opportunities.
The importance of demand planning cannot be overstated – we all know it is critical for success – and that is why we conducted the BearingPoint “Excellence in Demand Planning” study. We surveyed 168 demand planning professionals from companies in several industries across Europe, and the study provides insights on:
• How are mature companies integrating market uncertainty and assumptions related to demand impact in a complex and competitive environment?
• Are planning processes stable and the supporting tools smart and integrated?
• Is the organization using the latest tools to act in a more agile manner on the market?
Please enjoy reading our “Excellence in Demand Planning” study, and we hope it inspires you to evaluate the demand planning in your company and to take the necessary steps to improve it.
Matthias Loebich Dr. Stefan Penthin Partner Partner
3Study Demand Planning | Red Paper
Executive SummaryThe importance of demand planning is expected to increase significantly as shown in this study. Companies today operate in complex, volatile and uncertain environments. This is reflected by the fact that two thirds of study participants confirm that they have to deal with demand volatility and/or seasonality in their business.
The BearingPoint “Demand Planning Excellence Matrix” brings together planning environment complexity and demand planning maturity. According to our expertise, a good fit helps to avoid low planning accuracy and inadequate planning effort. The study reveals that 42 percent of participants show a misfit of complexity and maturity. This finding indicates there is still substantial room for improvement in aligning demand planning maturity with market requirements. The improvement potential affects multiple areas in the demand planning maturity dimensions: organization, process, methods, KPI‘s and tools, as shown in Figure 1.
FIGURE 1: OVERVIEW OF DEMAND PLANNING COMPLEXITY AND MATURITY
of participants expect that the importance of demand planning will increase
77%
Basic steps have been taken, but more effort is required to deploy more sophisticated planning methods
Abb. 1: Overview Demand Planning Complexity and Maturity
Products
Mar
kets
low high
high
Incre
asing Complexity
1. Planning Environment Complexity 2. Demand Planning Maturity
low
high
Organization
Process
MethodsKPI’s
Tools
3. Demand Planning Excellence Matrix
Maturity
Com
plex
ity
low high
high
Misfit
PotentialMisfit
Fit
Fit
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77 percent of participants expect the importance of planning to increase in the future. This implies that challenging environmental impacts and complexities need to be adequately reflected in the corporate demand planning processes. However, only one third of participating companies state that they are satisfied with their current demand planning. Satisfaction typically depends mainly on perceived accuracy, as well as the efforts required to generate the plan. Consequently, important rework on processes, organization, methods and tools is often required.
The majority of survey participants seem to have taken basic steps to align their demand planning accordingly. Nevertheless, the survey reveals significant room for improvement. More efforts have to be made to deploy more sophisticated planning methods and best align demand planning maturity with market requirements. Only 19 percent confirm that they are, for example, able to evaluate alternative scenarios. Only 4 percent of participants use statistical calculations with external indices as their first ranked planning method. This could be significant reasons why only about one third of respondents are satisfied with the accuracy of their plan. In summary it can be said that demand sensing, i.e. the deployment of next generation forecasting techniques, is at many companies still underdeveloped.
Considering the planning process dimension, the majority of companies (55 percent) state that they do not receive demand signals adequately in advance. This implies that they need to design their planning processes more flexibly and responsively to ad- hoc changes. However, only 39 percent of participants confirm being able to do this. The situation is reinforced by the fact that 57 percent of the participating companies are not involved in systematic collaboration with their customers regarding forecasting. On the other hand, respondents highlighted a relatively high integration level of their demand planning process with internal teams, e.g., 66 percent confirm integration with the financial plan.
Regarding the organizational setup, the demand planning process seems well supported as 61 percent state that they receive support from top management. Responsibility for demand planning resides in most cases (65 percent), and at least partially, within a central team. However, only about 23 percent of respondents confirm having a dedicated demand planning team.
Measurement of planning performance is not widely adopted. 42 percent of participating companies do not use any KPI‘s. Out of the adopters, only 22 percent confirm linking personal employee incentives to their planning KPI‘s.
Excel is still the predominant planning tool in the market with 43 percent of participating companies confirming the use of Excel or Excel + add ins as a primary tool. In spite of this, satisfaction with the performance of planning tools is perceived as high (55 percent are satisfied) as well as with the availability of up- to- date historical operational data (72 percent). However, only 42 percent state that their tools meet planning requirements and only 37 percent rate the usability of the tools as good. These findings are surprising, as Excel- based planning usually does not offer the same broad range of functionalities as market solutions.
Only about one third of respondents are satisfied with the accuracy of their plan
Excel is still the dominant planning tool with 43 percent confirming its use
43%
5Study Demand Planning | Red Paper
Introduction and Importance of Demand PlanningToday’s business environment forces companies to deal with many challenges. Four key challenges put pressure on supply chains: globalization, volatility, complexity and competition. Excellent performance in demand planning processes becomes a necessity to successfully deal with these challenges.
While globalization leads to a wider set of variables within planning processes, a higher product diversification, mass-customization and faster business trends (complexity) increase the level of demand uncertainty. In combination with supply uncertainty, companies face increased levels of instability (volatility) and unpredictability of markets. Additionally, a higher degree of competition and changing buying behaviors need to be adequately considered in the planning processes.
Successful demand planning, especially in volatile markets, is often seen as the foundation of a successful supply chain. Set up correctly, it increases inter-functional collaboration within the company and cross-company collaboration with customers to get a clearer insight on the point of consumption. This information allows the supply chain to meet demand more efficiently and at the right time, along with the correct service. Therefore, improvements in planning and forecasting directly translate into better business decisions and financial benefits.
Challenges and Benefits of Demand Planning Excellence
To deal with the key challenges, supply chains require more flexibility, responsiveness and adaptability. Depending on the individual planning environment, for many companies this requires an improvement in their demand planning so that they can adapt to changing situations more quickly. To meet the critical success requirements, demand planning must be more reliable in providing market information. A high forecast accuracy is necessary to meet the increasing expectations regarding delivery capability in today’s extremely competitive marketplaces. Globalization impacts demand planning as it requires supply chains to expand beyond domestic and national borders, driven by rising cost pressures, new market opportunities, rivalry between competitors and scarcity of resources. A shift in demand to the east, combined with changes in demographics and offshoring production tendencies, are all elements which require demand planning to gather and consolidate information from a broader geographic region. It also needs to be more closely connected to supply chain risk management and there must be consideration in the plan for appropriate responses to political, environmental or cultural threats and risks. Shorter macro-economic cycles and the impacts of crises are reinforcing this effect further.
On top of this, growing volatility is a factor in striving for demand planning excellence. It means shorter product lifecycles and rapidly changing customer needs resulting in higher product variety. Consequently more diverse assortments require more flexible productions with smaller quantities which increase planning complexity. Additionally, markets experience changes in customers’ buying behaviors. Easier access to information leads to better informed customers shifting more and more buying power to online platforms. Omni-channel buying together with a decrease in brand loyalty are the market reality and increase the need to focus more strongly on the demand signals. With respect to demand planning, this may mean a close review of the planning methods, which demand signals are used, how and which forecasting methods are deployed as well as how the planning parameters are set.
Main challenges for supply chains: globalization, volatility, complexity, competition
Successful demand planning is the foundation for successful supply chains
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Complexity can be differentiated into market and product complexity. Market and product complexity results from the above-mentioned trends of globalization and volatility. The alignment of planning to the environment allows companies to reap significant benefits by enabling them to provide the high customer service levels demanded at adequate costs in spite of the increased complexity.
Some of the benefits for companies striving for planning excellence are, amongst others, higher customer orientation and satisfaction; increased visibility and reduced risk of disruption within the supply chain as well as improved financial figures from improving stock quality and levels, as shown in Figure 2. Higher forecast quality allows a reduction of inventory levels, resulting in lower capital costs while keeping the service level constant and thus helping companies to remain lean.
FIGURE 2: BENEFIT OF EXCELLENCE IN DEMAND PLANNING
Demand Planning Process Characteristics
The demand planning process is characterized by being a collaborative supply chain management process embedded into the holistic supply chain planning landscape highlighted in Figure 3. It enables the development of demand forecasts that may serve as an input to sales and operations planning, MRP/replenishment planning, inventory planning, collaboration with suppliers/customers and the handling of phase in and out of products (PLM). Therefore, the level of excellence of the demand planning process has an impact on most, if not all, subsequent planning activities.
Demand planning typically comprises the development of a forecast, which utilizes sales, marketing, finance forecast inputs to create an accurate demand plan that reflects all known constraints.
Main benefits of demand planning excellence: higher customer orientation and satisfaction, increased visibility and reduced risk of supply chain disruption
Leading demand planning processes foster collaboration and combine qualitative and statistical methods
Abb. 2: Benefit of Excellence in Demand Planning
Excellence in Demand
Planning
Right product, right
quantity in the right time Higher
e�ciency intranslating
demand acrossorganization
Higher customer
orientation andcustomers
satisfactionLargermarketshare
Morereliable
(finacial)forecasts
Lowerinventory
levels at theright
location
7Study Demand Planning | Red Paper
FIGURE 3: OVERVIEW INTEGRATED PLANNING PROCESS
The aim of this process is to get the most accurate predictions of future demands. It is not the setting of sales targets, but a realistic forecast under the known or very likely constraints.
Leading demand planning processes consist of several sequential and collaborative steps, combining quantitative and statistical methods with the best available qualitative intelligence from various sources to develop a consensus plan.
The way excellent demand planning processes are set up is reflected in our holistic approach, as shown in Figure 4. This framework comprises all environmental and internal aspects and is the foundation for the structure of this survey.
FIGURE 4: HOLISTIC INTEGRATED PLANNING FRAMEWORK AND APPROACH BY BEARINGPOINT
Sales & Demand Planning
Corporate Supply Chain Strategy
Financial Planning
Supply
Plan
ning
Forecasting Objectives
Planning Env
ironm
ent a
nd C
ompl
exity
Abb. 4: Holistic Integrated Planning Framework and Approach by BP
KPI’s
Tools
ProcessOrganization
Methods
Integration& StrategyAlignment
Abb. 3: Overview Integrated Planning Process
Supply Chain Execution
Scheduling
Procurement
Production Distribution
Transportation
Master SupplyPlanning
Sales & OperationsPlanning (S&OP)
BusinessPlanning
Demand Fulfillment
DemandPlanning
InventoryDeployment
InventoryPlanning
Hours
Years
Length of Planning Horiz
onBusiness Impact of Decisions
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Survey ParticipationIn total, 168 demand planning professionals participated in the Excellence in Demand Planning study by completing the online survey. Companies of all sizes took part with roughly half (48 percent) of all participating companies generating annual revenues higher than 1bn Euro, as shown in Figure 5.
FIGURE 5: ANNUAL REVENUES OF PARTICIPATING COMPANIES
The focus of this survey was on companies headquartered in Europe, primarily in the Western countries. German companies predominate with 43 percent, followed by French (23 percent) and then by companies from the rest of Europe, as shown in Figure 6.
FIGURE 6: COUNTRY OF HEADQUARTER OF PARTICIPATING COMPANIES
The study was conducted across different industry segments. Participants came primarily from different industry clusters with a focus on industrial products (37 percent), consumer goods (32 percent) and automotive (16 percent), as shown in Figure 7. Due to the different characteristics of these industry segments, industry segment specific questions were sometimes used.
Abb. 5: Annual Revenues of Participating Companies
24 %
20 %22 %
8 %
26 %<100m Euro
100–500m Euro
501–1.000m Euro
1.001–5.000m Euro
>5.000m Euro
168 demand planning professio-nals participated in the studyAbb. 6: Country of Headquarter of Participating Companies
4 %
7 %
4 %3 %
2 %
43 %
23 %
14 %
Germany
France
Other Western Europe
Northern Europe
Eastern Europe
North America
Asia
Southern Europe
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FIGURE 7: INDUSTRY SECTOR OF PARTICIPATING COMPANIES
More than half of the participants operate in the supply chain management of their companies, as shown in Figure 8. With marketing and sales representing 30 percent, four out of five participants work in one of these functional departments. Finance, logistics and general management only represent 15 percent. The remaining 4 percent work in other functional departments.
FIGURE 8: FUNCTIONAL DEPARTMENTS OF PARTICIPANTS
Abb 8. Functional Departments of Participants
4 %51 %
5 %
30 %
7 %
3 %Supply Chain Management
Marketing & Sales
General Management
Finance
Others
Logistics
Abb. 7: Industry Sector of Participating Companies
37 %
32 %
4 %
16 %
10 %
1 %Industrial Products
Consumer Goods
Automotive
Chemicals & Life Sciences
Energy & Natural Resources
Others
INDUSTRIAL PRODUCTS
Majority of participants work in supply chain management and marketing & sales
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Demand Planning Complexity and MaturityThis study analyzes the fit of planning complexity and demand planning maturity in participating companies. The underlying hypothesis was that the degree of planning maturity should reflect the degree of planning complexity, so that unnecessary planning effort or low planning accuracy is avoided.
Planning complexity is the result of the planning situation and consists of two dimensions: market and product complexity, each driven by three attributes. For market complexity these attributes are demand volatility, structure of customer base and degree of demand anticipation; for product complexity the attributes are product variety, degree of standardization and product lifespan/ lifecycle, as shown in Figure 9.
FIGURE 9: CONCEPT OF BEARINGPOINT PLANNING ENVIRONMENT COMPLEXITY MATRIX
The BearingPoint demand planning maturity model relates to the degree of sophistication of the planning relevant dimensions. These dimensions are: organization, process, methods, KPI‘s and tools, as shown in Figure 10. The model describes maturity levels, which are seen by how well the dimensions’ characteristics can reliably and sustainably support the required outcomes from the demand planning. The sophistication of the maturity for each dimension depends on different characteristics. For each maturity level, the model delivers a description of the dimensions’ refinement as guiding principles for improving planning quality and efficiency.
Abb. 9: Concept of BearingPoint Planning Environment Complexity Matrix
Product ComplexityProduct variety, standardization,
lifespan/lifecycle
Market ComplexityDemand volatility,
customer base, demandanticipation
low high
high
I II
III IV
Com
plex
ity o
f the
pl
anni
ng e
nviro
nmen
t
I Planning environment with relatively low market and product complexities
II Planning environment with high product complexity and relatively low market complexity
III Planning environment with high market complexity and relatively low product complexity
IV Planning environment with high market and product complexities
Planning complexity results from market and product complexity
11Study Demand Planning | Red Paper
FIGURE 10: DIMENSIONS OF THE MATURITY
The “demand planning excellence matrix” combines both concepts. The higher the planning complexity companies have to deal with, the more mature companies demand planning should be to enable high business performance. The matrix indicates the alignment of requirements and characteristics. The requirements in each quadrant differ regarding demand planning and the relevant planning dimensions. Depending on the location in the matrix, the participating companies were classified as “down to earth,” “minimalistic planner,” “excessive planner” and “balanced,” as shown in Figure 11.
FIGURE 11: DEMAND PLANNING EXCELLENCE MATRIX
Abb. 11: Demand Planning Excellence Matrix
Maturity
Com
plex
ity
low high
high
Downto Earth
Excessiveplanner
Minimalisticplanner Balanced
Abb. 10: Dimensions of Maturity
KPI’s
Tools
ProcessOrganization
Methods
DemandPlanningProcess
KPI’s· Availability & usage· Degree of standardization· Application on planning level
Tools· Performance· Usability· Functionalities
Organization· Responsibility and involvement· Degree of centralization· Internal functional integration· Executive sponsorship
Methods· Forecast methods and algorithms· Planning accuracy and stability· Degree of external collaboration
Process· Degree of standardization · Process integration· Process e cency · Process alignment· Degree of flexibility
Planning maturity relates to the degree of sophistication of the planning dimensions
The degree of planning maturity should reflect the degree of planning complexity – as shown in the BearingPoint demand planning excellence matrix
12 Study Demand Planning | Red Paper
Two states are possible: complexity and maturity match well or not. Down to earth and balanced have a well- adjusted planning maturity, meaning their planning maturity is well adapted to the planning complexity. Excessive planners may have a higher planning maturity than necessary and thus may be able to reduce their planning efforts, without suffering a decrease in planning performance. The “minimalistic planner” shows a lower planning maturity than internal and external conditions may require. In this case it should be investigated if an increase in planning maturity may improve the planning quality.
The survey reveals that a number of participants do not match an appropriate maturity level as 42 percent of them are located in the areas of minimalistic or excessive planners. Not surprisingly, the satisfaction level with the demand plan across the minimalist planners is at the lowest level with 2.6 points, as shown in Figure 12.
FIGURE 12: SURVEY RESULT DEMAND PLANNING EXCELLENCE MATRIX
Based on the study responses, the average maturity for each dimension was determined, as shown in Figure 13. The maturity model is designed to allow benchmarking the demand planning maturity to identify and quantify improvement potential. Based on the identified “maturity gaps” of each planning dimension, the areas with improvement potential can be identified.
FIGURE 13: AVERAGE MATURITY LEVEL FOR EACH DIMENSION
of the parti cipants do not achieve an appropriate maturity level42 %
Satisfaction: Minimum 1, Maximum 5Maturity
Com
plex
ity
Downto Earth
Excessiveplanner
Minimalisticplanner
Balanced
Satisf. 3,0 Satisf. 3,5
Satisf. 2,6 Satisf. 3,3
22,6 %
22,0 %
35,7 %
19,6 %
Abb. 12: Survey Results Demand Planning Excellence Matrix
5,0Planning Process
Planning Organization
Abb. 13: Average Maturity Level for Each Dimension
4,0
3,0
2,0
1,0
0,0
Planning MethodPlanning KPI’s
Planning Tools
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Companies with “low complexity” planning conditions have a much more stable demand signal compared with companies operating in a “high complexity” environment. This results in different goals for demand planning. Companies categorized as “down to earth” need to focus on organizing the demand planning process more efficiently by minimizing the planning effort.
The situation for companies in the quadrant “balanced” is completely different. Their planning environment is characterized by higher market uncertainty. Hence, a close collaboration between the different planning spheres in an integrated planning landscape with widespread availability of information across the horizontal and vertical organization and a high demand forecast accuracy are strongly recommended for these companies.
The results indicate a slightly varying maturity amongst different industry segments. Chemicals & life sciences, consumer goods and industrial products have above average maturity levels, while automotive and energy & natural resources are below average, as shown in Figure 14.
FIGURE 14: AVERAGE MATURITY LEVEL BY INDUSTRIES
Abb. 14: Average Maturity Level by Industries
0,0 1,0 3,0 4,0 5,02,0
Chemical & Life Sciences
Consumer Goods
Industrial Products
Automotive
Energy & Natural Resources
Other
The maturity level of chemicals & life sciences, consumer goods and industrial products compa-nies are above average
14 Study Demand Planning | Red Paper
The energy & natural resources industry has the lowest maturity level in all dimensions. However, industrial products companies outperform other industries in the process dimension (3.57 points) and consumer goods companies in methods dimension (3.16 points). Chemicals & life sciences scores highest in the organization (3.41 points), KPI‘s (2.92 points) and tools dimensions (3.42 points), as shown in Figure 15.
FIGURE 15: OVERALL AVERAGE “DEMAND PLANNING PROCESS MATURITY” PER DIMENSION BY INDUSTRIESAbb. 15: Overall Average “Demand Planning Process Maturity” per Dimension per Industries
0
1,0
2,0
3,0
4,0
5,0
Planning Process
Planning Organization
Planning KPI’s
Planning Method
Chemical & Life Sciences Consumer Goods Industrial Products
Automotive Energy & Natural Resources Other
Planning Tools
15Study Demand Planning | Red Paper
METHODS
ORGANIZATION
KPI’s
PROCESS
ENVIRONMENT
TOOLS
More Fruitful Demand PlanningThe importance of demand planning is expected to significantly increase in today’s volatile environment. Our survey reveals there is still significant room for improvement to deploy more sophisticated planning methods and best align demand planning maturity with market requirements.
EnvironmentCompanies today operate in complex, volatile and uncertain environments. This is reflected by the fact that 2/3rd of the study participants confirm that they have to deal with demand volatility and/or seasonality in their business.
Therefore unsurprisingly 77% of the participants expect planning to become increasingly important in the future. This implies that those challenging environmental impacts need to be adequately reflected in the maturity and characteristics of corporate demand planning processes.
However, only 1/3 of the participating companies say they are satisfied with their current demand planning processes. Satisfaction with a plan is usually driven by its perceived accuracy, and by the amount of e�ort that has gone into creating it. Therefore in many cases a rework of processes, organization, methods and tools seems to be required.
KPI’sMeasurement of planning performance is not widely adopted. 42% of the participating companies do not use any KPI’s. Out of the adopters only 22% confirm that they also link personal employee incentives to their planning KPI’s.
ToolsExcel is the predominant planning tool in the market with 43% of participating companies confirming that they use Excel or Excel + Add Ins as a primary planning tool. Despite this fact, the satisfaction with the performance of planning tools is perceived as high (55% are satisfied) just as with the availability of up-to-date historical operational data (72% confirm this availability). However, only 42% state that the tools fulfill the planning requirements and only 7% rated the usability of the tools as good.
ProcessesThe majority of companies (55%) do not receive market information adequately in advance. This implies that they need to design their planning processes to be flexible, with the ability to incorporate ad hoc changes. 39% of participants confirm that they are already doing this.
This absence of advanced market information is reinforced by the fact that a majority of participating companies (57%) are not involved in systematic collaboration with their customers regarding forecasting. On the other hand the respondents have highlighted a relatively high integration level in their demand planning process between internal teams (e.g. almost 66% confirm integration with the financial plan).
OrganizationResponsibility for demand planning resides in many cases (65%) at least partly within a central team. However, only a quarter of respondents confirm that they have a dedicated demand planning team. Generally the process is well supported as 61% say that they receive support from their top management.
MethodsBasic planning methods seem to be applied adequately, although companies are still struggling with advanced planning methods, e.g. 19% only confirm that they are able to evaluate alternative scenarios. Statistical calculations with external indices are only used by 21% and Big Data only used by 11% of the survey participants. This could be one significant reason why only roughly one third of respondents are satisfied with the accuracy of their plan.
2/3rd
77%
of the participants confirm that seasonality and volatility are factors they have to take into account.
of participants expect demand planning to become increasingly important in the future.
1/3rdof the participants say they are satisfied with the accuracy of their plan.
42%do not match demand planning maturity and business complexity.
57%of participating companies do not plan collaboratively.
55%of companies do not receive market information in advance.
61%say they receive support from their top management.
42%of participating companies do not use any KPI’s.
43%of participating companies confirm that Excel is their primary planning tool.
19%only confirm they are able to use alternative planning scenarios.
Results are based on a survey with 168 companies across Europe16 Study Demand Planning | Red Paper
METHODS
ORGANIZATION
KPI’s
PROCESS
ENVIRONMENT
TOOLS
More Fruitful Demand PlanningThe importance of demand planning is expected to significantly increase in today’s volatile environment. Our survey reveals there is still significant room for improvement to deploy more sophisticated planning methods and best align demand planning maturity with market requirements.
EnvironmentCompanies today operate in complex, volatile and uncertain environments. This is reflected by the fact that 2/3rd of the study participants confirm that they have to deal with demand volatility and/or seasonality in their business.
Therefore unsurprisingly 77% of the participants expect planning to become increasingly important in the future. This implies that those challenging environmental impacts need to be adequately reflected in the maturity and characteristics of corporate demand planning processes.
However, only 1/3 of the participating companies say they are satisfied with their current demand planning processes. Satisfaction with a plan is usually driven by its perceived accuracy, and by the amount of e�ort that has gone into creating it. Therefore in many cases a rework of processes, organization, methods and tools seems to be required.
KPI’sMeasurement of planning performance is not widely adopted. 42% of the participating companies do not use any KPI’s. Out of the adopters only 22% confirm that they also link personal employee incentives to their planning KPI’s.
ToolsExcel is the predominant planning tool in the market with 43% of participating companies confirming that they use Excel or Excel + Add Ins as a primary planning tool. Despite this fact, the satisfaction with the performance of planning tools is perceived as high (55% are satisfied) just as with the availability of up-to-date historical operational data (72% confirm this availability). However, only 42% state that the tools fulfill the planning requirements and only 7% rated the usability of the tools as good.
ProcessesThe majority of companies (55%) do not receive market information adequately in advance. This implies that they need to design their planning processes to be flexible, with the ability to incorporate ad hoc changes. 39% of participants confirm that they are already doing this.
This absence of advanced market information is reinforced by the fact that a majority of participating companies (57%) are not involved in systematic collaboration with their customers regarding forecasting. On the other hand the respondents have highlighted a relatively high integration level in their demand planning process between internal teams (e.g. almost 66% confirm integration with the financial plan).
OrganizationResponsibility for demand planning resides in many cases (65%) at least partly within a central team. However, only a quarter of respondents confirm that they have a dedicated demand planning team. Generally the process is well supported as 61% say that they receive support from their top management.
MethodsBasic planning methods seem to be applied adequately, although companies are still struggling with advanced planning methods, e.g. 19% only confirm that they are able to evaluate alternative scenarios. Statistical calculations with external indices are only used by 21% and Big Data only used by 11% of the survey participants. This could be one significant reason why only roughly one third of respondents are satisfied with the accuracy of their plan.
2/3rd
77%
of the participants confirm that seasonality and volatility are factors they have to take into account.
of participants expect demand planning to become increasingly important in the future.
1/3rdof the participants say they are satisfied with the accuracy of their plan.
42%do not match demand planning maturity and business complexity.
57%of participating companies do not plan collaboratively.
55%of companies do not receive market information in advance.
61%say they receive support from their top management.
42%of participating companies do not use any KPI’s.
43%of participating companies confirm that Excel is their primary planning tool.
19%only confirm they are able to use alternative planning scenarios.
Results are based on a survey with 168 companies across Europe 17Study Demand Planning | Red Paper
Study ResultsThe following chapter looks at the detailed results regarding the individual planning maturity dimensions, and describes the detailed findings in these areas.
While companies operate in particular environments, the specific sphere has a huge impact on the design of the demand planning.
Only a minority of the companies deal with stable markets. 30 percent confirm that the demand pattern is rather constant. 21 percent of participants claim that the customer demand is communicated well in advance and the customer base consists of a few large customers. On the product side, only 30 percent state that the products are very standardized, 81 percent plan 1000 or fewer products and 48 percent of participants indicate that the product lifespan is more than 8 years.
Planning Process
One crucial element in demand planning is to get the process right. Demand planning is run in most companies on a monthly basis (in 53 percent of the cases) and should not be an isolated process but, on the contrary, needs to be integrated in the best possible way with other planning activities and across the different functions. Surprisingly, more than two thirds of participants confirm that the plan is integrated with the financial plan in their organizations, indicating a high level of attention for this topic. This is especially important as good collaboration is a key element for further enhancing the demand plan with demand signal knowledge that systems cannot provide. Collaboration seems to be adequately deployed internally, but to a much lesser degree on an external basis with 57 percent stating not having systematic collaboration with their customers.
Additionally the process needs to fulfill typical operational process management requirements such as being as efficient and standardized as possible. The majority of participants, about 61 percent of the responding companies, state that their demand planning process is highly standardized and uses clear guidelines and milestones, whereas only a small group of 29 percent confirm that it is also efficient. The observed lack of efficiency may correlate either with the lack of transparency through KPI‘s to monitor efficiency or the lack of modern IT systems deployed to support the process.
FIGURE 16: THE DEMAND PLANNING PROCESS IS VERY EFFICIENT WHICH MINIMIZES THE EFFORT REQUIRED FOR PLAN CREATION
Fig. 16: The Demand Planning Process is Very E�cient Which Minimizes the E�ort Required for Plan Creation, e.g., Data Provision and Preparation
Strongly Agree
24 %40 %6 % 25 %
Strongly Disagree
5 %
The flexibility in the process to react to ad- hoc changes in the market is also important. Less than 40 percent of the respondents can confirm that their process is designed in such an agile way as to adequately cover for these unexpected changes. However, more than half (around 55 percent) confirm that they shape their demand to reflect and match the planned supply.
Only a minority of companies operate in a stable market environment
Demand planning needs to be integrated with other planning activities and across functions
of participants confirm that their planning process is efficient29 %
18 Study Demand Planning | Red Paper
As a consequence, approximately half (45 percent) of the respondents can only confirm that their process delivers a realistic plan without bias. This is an acceptable range, but also shows clear room for improvement in many organizations. Bias can have several causes, such as optimism and overconfidence, sandbagging or stronger emphasis on recent events, and is increased in cases where the inside view predominates. The process should include measures and activities to detect and avoid bias.
Planning Organization
Another important aspect is the definition of the most suitable organizational setup to support the planning process. Only about a quarter (23 percent) of the organizations have a dedicated demand planning team in place. Largely the process is driven either in the sales (31 percent) or in the supply chain teams (22 percent). These two departments are also involved to the highest degree with 84 percent and 57 percent confirming collaborating with these functions, followed by finance (53 percent) and top- management (49 percent). This is good practice, as the functions which are closest to the markets and the demand signals are the ones being involved the most. In general most companies (78 percent) have at least three functions or teams involved in the creation of the plan, which underpins and confirms the strong cross- functional aspect of the process in reality.
FIGURE 17: INVOLVEMENT WITHIN THE DEMAND PLANNING PROCESS, CLASSIFIED BY FUNCTIONAL DEPARTMENT
Demand planning has a good visibility and standing in many organizations. There is good sponsorship support from senior management, with 61 percent confirming this to be available. This highlights management’s good understanding of the importance of this corporate process.
In general, most of the companies have a tendency to prefer planning their demands more centrally – 37 percent state doing this exclusively for the whole company and a further 28 percent plan centrally as well as locally. This tendency may be driven either by supply chain structures or additionally by required expert know- how regarding, e.g., working with sophisticated tools and methods to generate the best possible plan or to avoid too much effort in plan creation.
Planning Methods
Only a rather small group of 29 percent confirm that their plans are very accurate, i.e., that plan and actual figures deviate only to a limited degree, as shown in Figure 18. This can be seen as rather disappointing, considering the high efforts companies typically invest in the creation of their plans. Therefore the question remains, which methods are required to create the best possible forecast and plan?
In 76 percent of the com pa nies the demand plan is developed by the demand planner, sales or marketing
76 %
Abb. 17: Involvement within the Demand Planning Process, Classified by functional Departments
0 10 30 40 50 60 7020 80 90 %
Sales
Supply Chain Team
Finance / Controlling
Top Management
Demand Planning Team
Marketing
Procurement
19Study Demand Planning | Red Paper
FIGURE 18: THE PLANS ARE VERY ACCURATE: PLAN AND ACTUAL FIGURES MATCH WELL (THE DEVIATION FROM THE PLAN IS ACCEPTABLE)
Fig. 18: The Plans Are Very Accurate: Plan and Actual Figures match Well (the Deviation From the Plan Is Acceptable)
26 %41 %7 % 23 % 3 %
Strongly AgreeStrongly Disagree
A proper segmentation of the planning sphere (customers, markets, products, etc.), depending on the individual demand signals, is the starting point. It helps to define at which level the plan has to be created to make sense for the business and which planning methods deliver the best results. Only approximately half (49 percent) of the respondents confirm having this segmentation in place as the basis for the allocation of the respective methods or mix of methods. This low segmentation ratio is reinforced by the fact that only 42 percent have a strong exception focus and work selectively on the main issues as compared to always on the whole plan.
Quantitative techniques such as demand sensing describe the deployment of next generation statistical and mathematical methods to create an even better prediction of future demands based on historical and near real- time or big data information. While the availability of data seems not to be the problem, with 72 percent confirming having historic data available, stored centrally and everybody involved having access to it, the capabilities to extract information from the data and apply demand sensing are much less developed. Only 38 percent of the respondents confirm properly cleaning their data before using it for forecasting.
While a number of companies seem to have basic quantitative methods applied (67 percent confirm using statistical methods among the top three planning methods applied), the more advanced and sophisticated methods are not very widespread at all yet. Only 21 percent confirm considering external indices in their calculations and only 11 percent refer to big data analytics on a regular basis when creating their plans. Slightly more than a half of the companies consider customer forecasts. Additionally, only 19 percent confirm being able to create and use scenarios within their planning in order to evaluate opportunities and threats.
Qualitative methods include expert involvement to provide insights, which systems cannot have. While at least 78 percent of the companies have this internal expert involvement, only 22 percent in a systematic way involve external experts. This goes along with the fact that only 23 percent of the participating companies collaborate systematically with their clients.
Planning KPI‘s
Key performance indicators are an important controlling instrument, especially in planning. Therefore it is surprising that just over half of the respondents (58 percent) confirm having KPI‘s related to planning in place, as shown in Figure 19.
Segmentation of the planning sphere to select proper planning methods is good practice to create the best possible forecast
confirm the avail-ability of historic data, but many show limited capabilities
in extracting the best possible information from it
72 %
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FIGURE 19: GENERAL USE OF KPI‘S
Abb. 19: General Use of KPI’s
42 %
58 % 92 %
8 %
KPI’s relating to demand planning have been defined
and are in use
KPI’s are used to measure the
accuracy of the plan
No
Yes
KPI‘s are part of governance and help to measure the success of the planning efforts. This is important as root causes for changes in, e.g., the planning accuracy need to be identified and appropriate measures defined. Out of the companies using KPI‘s, the vast majority (92 percent) measure the accuracy of the plan and 66 percent the efficiency of the planning process. A large group (72 percent) of respondents have their KPI‘s standardized across the entire business.
Relatively few companies, with only 35 percent agreement, regularly review their forecasting models based on KPI‘s. Lower still is the number (22 percent) who confirm the adoption of KPI- based incentive schemes to further drive the quality of the plan.
Planning Tools
Planning involves working with a lot of data from all areas of the business. It also possibly involves the creation of data by statistical forecasting. This task can be significantly facilitated by deploying a best- in- class demand planning solution. There is a wide range of dedicated software available. Nevertheless, Microsoft Excel still is the most commonly used primary planning tool among the participating companies. Nearly half of the companies either use Excel or Excel with advanced functionalities through add-ins. The share of planning tools that are developed and sold from software companies (“market solutions”) is only at 34 percent, as shown in Figure 20. From these a majority (46 percent) states using SAP for demand planning.
FIGURE 20: PRIMARY PLANNING TOOLS
At 55 percent, just more than half of the companies stated that they are satisfied with the performance of their tools. However, a significantly lower percentage (42 percent) confirmed that the tool fulfills all requirements and even fewer (37 percent) are satisfied with the usability of their tool.
of partici pating companies do not use any KPI’s42 %
Abb. 20: Primary Planning Tool
38 %22 %
28 %
15 %1 %
Market Solution
None
Excel
Excel + Add-ins
Selfprogrammed Solutions
21Study Demand Planning | Red Paper
Outlook and RecommendationWhen looking at how demand planning will develop and what the most anticipated benefits are, participants see the reduced risk of supply chain disruption as the biggest lever. A high forecast accuracy has positive effects on improving customer service levels and reducing inventory levels. Thus an excellent demand planning process helps to save costs. This is reflected well in the top five improvement areas shown in Figure 21.
FIGURE 21: IMPROVEMENTS IN THE DEMAND PLANNING PROCESS, METHODS OR ORGANIZATION ARE EXPECTED TO...
Confirming our daily consulting experience, this study’s participants place top priority on demand planning within their companies. The majority of the participants expect an increase in the importance of demand planning processes – 77 percent stated this. This is not surprising when looking at the challenges companies are dealing with in the current market situation.
BearingPoint recommends that companies review the maturity of their demand planning processes in a three phase approach as shown in Figure 22.
FIGURE 22: BEARINGPOINT THREE PHASE APPROACH
A wide range of benefits can be expected from an excellent demand planning process
Abb. 22: BearingPoints’s Three Phase Approach
Act
See
Und
erst
and
Create Top Management Awareness and Identify Strategic Vision
Assess Status-Quo Maturity and Quantify Benefits
Detailed To-Be Design Plan and Design Improvement Initiative Setup Performance Tracking
Apply Measures – Change Organization, Processes, Tools, etc.
Monitor Performance
Accompany Transformation Journeywith adequate Change Management
Fig. 18: Improvements in the Demand Planning Process, Methods or Organization Are Expected to …
Strongly AgreeStrongly Disagree
24 %
25 %
23 %
19 %
16 %
14 %
17 %
18 %
8 %
10 %
14 %
reduce the risk of supply chain disruptionthrough higher demand visibility
significantly increase forecast accuracy
significantly improve customer service levels
significantly reduce inventory levels
drive revenue/profit growth
significantly increase capacity utilization
significantly reduce the number ofobsolete products
improve product availability formarketing and promotional campaigns
significantly increase sales force e�ciency
significantly reduce sourcing costs
significantly reduce the numberof expedited shipments and rush orders
n
167
168
168
168
165
167
167
166
167
167
166
ø
3,9
3,7
3,8
3,5
3,5
3,4
3,2
3,1
3,1
3,1
2,9
47 %
43 %
41 %
41 %
39 %
37 %
30 %
24 %
32 %
24 %
22 %
20 %
19 %
21 %
21 %
26 %
29 %
22 %
21 %
31 %
35 %
27 %
8 %
10 %
11 %
11 %
16 %
14 %
19 %
24 %
21 %
25 %
20 %
8 %
12 %
13 %
8 %
17 %
1%
3 %
4 %
3 %
6 %
6 %
22 Study Demand Planning | Red Paper
The recommended approach is to adjust process maturity to ideally reflect the requirements of the planning environment. As the study highlights, this is not the case for 42 percent of respondents. In particular, the following aspects require attention:
• Implement an efficient process based on excellent collaboration internally as well as externally. This concerns digitalization as well and is therefore based on having a suitable IT tool installed to support the implementation of the correct process governance
• Empower your dedicated demand planning team of excellence to gather the right demand signals and convert them into valuable insights for where the business is heading
• Apply the right mix of methods per product segment to develop the best possible forecast as a basis for the plan, considering all relevant data and information sources. Consider digitalization trends and deploy state- of- the- art predictive analytics solutions to drive forecast accuracy
• Measure the performance of your demand plan by regularly reviewing a cross- functionally aligned set of metrics and KPI‘s. Do root cause analyzes to identify weak spots and continuously trim the performance and accuracy of your plan
• Proactively apply elements of demand shaping (e.g., dynamic pricing) for influencing the demand to match the planned supply well
The survey shows that many companies need to act. They should critically analyze their demand planning process to make required improvements. BearingPoint is uniquely positioned to support companies in optimizing their demand planning. We help to encompass the right balance between state-of-the-art process optimization, relevant advanced planning systems expertise, and the conviction that collaboration is key in planning. The reasons for this are, among others,
• Our field proven accelerators support quick project success, e.g., leading practice reference processes, maturity models, templates , questionnaires
• BearingPoint combines expertise in IT solutions AND organizational transformation, which is essential for optimizing seamless information flows in integrated planning environments
• BearingPoint places significant focus on Supply Chain Excellence represented by its extensive track record of successful project delivery
• An experienced team of professionals in planning has extensive market know- how about business models to deliver best of breed solutions
• BearingPoint follows a collaborative approach to mutually achieve project targets and emphasizes change management to help in making the benefits for you become reality
Review your planning maturity and reap significant benefits
23Study Demand Planning | Red Paper
DisclaimerBearingPoint Excellence in Demand Planning Survey 2015 was created by BearingPoint. The objective of this study was to evaluate the status quo of demand planning maturity in different industries to identify both opportunities for improvement as well as future challenges for companies across Europe.
The objective of the survey is to provide information around the topic and derive trends. The document is based on information gathered from primary sources (survey and interviews with participating companies) as well as selected secondary sources, which were deemed to be reliable. However, BearingPoint refuses to accept any responsibility or guarantees, neither for the completeness nor for the correctness of the data and information collected in the manner described. Without having conducted an independent validity check, BearingPoint considers all information, which was provided or is publicly accessible, to be correct, exact and comprehensive. The Excellence in Demand Planning survey 2015 is solely intended for information purposes. BearingPoint is aware that the study will be presented to decision makers. BearingPoint declines to assume any liability for any decisions or resolutions made based upon the information provided in the enclosed survey. This declination of liability refers to any claims possibly being considered with regards to this study.
Any usage of the document for purposes other than the provision of information described requires the prior written consent of BearingPoint.
24 Study Demand Planning | Red Paper
Table of FiguresFigure 1: Overview of Demand Planning Complexity and Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 2: Benefit of Excellence in Demand Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 3: Overview Integrated Planning Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 4: Holistic Integrated Planning Framework and Approach by BearingPoint . . . . . . . . . . . . . . . . . . . . 8
Figure 5: Annual Revenues of Participating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 6: Country of Headquarter of Participating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 7: Industry Sector of Participating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 8: Functional Departments of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 9: Concept of BearingPoint Planning Environment Complexity Matrix . . . . . . . . . . . . . . . . . . . . . . . 11
Figure 10: Dimensions of the Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Figure 11: Demand Planning Excellence Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Figure 12: Survey Result Demand Planning Excellence Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 13: Average Maturity Level for Each Dimension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 14: Average Maturity Level by Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Figure 15: Overall Average “Demand Planning Process Maturity” per Dimension by Industries . . . . . . . 15
Figure 16: The Demand Planning Process is Very Efficient Which Minimizes the Effort Required for Plan Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Figure 17: Involvement Within the Demand Planning Process, Classified by Functional Department . . 19
Figure 18: The Plans Are Very Accurate: Plan and Actual Figures match Well (the Deviation from the Plan Is Acceptable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Figure 19: General Use of KPI‘s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Figure 20: Primary Planning Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Figure 21: Improvements in the Demand Planning Process, Methods or Organization . . . . . . . . . . . . . . . 22
Figure 22: BearingPoint Three Phase Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
25Study Demand Planning | Red Paper
© 2015 BearingPoint Holding B.V. All rights reserved. Printed in the EU. The content of this document is subject to copy right (“Urheberrecht”). Changes, cuts, enlargements and amendments, any publication, translation or commercial use for the purpose of trainings by third parties requires the prior written consent of BearingPoint Holding B.V. Any copying for personal use is allowed and only under the condition that this copy right annotation (“Urheberrechtsvermerk”) will be mentioned on the copied documents as well.
ContactChina Yvon Donval Partner [email protected]
Germany Dr. Stefan Penthin Partner [email protected]
Matthias Loebich Partner [email protected]
France Philippe Chaniot Partner [email protected]
Nordics Patrick Palmgren Partner [email protected]
Russia Elena Litvinova Partner [email protected]
United Kingdom Angus Ward Partner [email protected]
Authors: Julie Richon, Melanie Tobler, Oktay Demir, Christian Opitz
26 Study Demand Planning | Red Paper
About BearingPoint
BearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client’s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world’s leading companies and organizations. Our 3500 people, together with our global consulting network serve clients in more than 70 countries and engage with them for measurable results and long-lasting success.
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