Demand Sensing: Finding The Right Balance

0Spinnaker Proprietary & Confidential 2014

All Rights Reserved 0Spinnaker Proprietary & Confidential 2014

All Rights Reserved

October 28, 2014

Demand Sensing:

Finding the Right Balance


All Rights Reserved 1

350+ resources

200+ clients globally

Spinnaker Overview



Goals For The Session

• Understand demand sensing key

concepts & capabilities

• Change management impacts on

organization; demand planning

maturity curve assessment

• Walk away with an improved,

objective view of the fit of SAP’s

demand sensing capabilities

Business

Process

People

Technology



Introduction

Joel Argo

Senior Manager

• A supply chain professional with 10 years of experience in Food & Beverage, CPG and Medical Device industries

• Extensive knowledge of Demand Planning, Supply Planning, Production Planning, Purchasing, and S&OP across SAP and JDA technologies

David Foster

Senior Manager

• A Supply Chain Functional Consultant with over 25 years of industry and IT experience

• Experience with hands-on cross module requirement analysis, design/development, configuration

• Rollouts experience in SAP/IBP, SAP/APO/DP/SNP/PPDS/TPVS/Alert Monitor, ECC/MM/PP as well as SAP/BW












Business

Process

People

Technology



Demand Planning Challenges

• Traditional statistical forecasting methods have become efficient

• Difficult to integrate real time data into a quantitative time series

statistical model

• Same time series model applied across short, mid, and long term

plan

• Difficult to plan product launches and promotions without

adequate sales history

• Time consuming to evaluate stat models across hundreds of SKUs

• Low volume items remain difficult to forecast due to fluctuations

in demand



Forecasting Improvement Initiatives

• Utilize Demand Sensing

technologies to

statistically improve

forecasts

Forecasting

Process

Improvement

Initiative

Demand Sensing

Description

• Use multi-variable statistical engine to

improve forecasts by regressing

• Original forecast

– Order and shipment history

– Other data streams (e.g., POS, channel

inventory, warehouse withdrawals)

Statistical forecasting

• Forecast shipments

directly at DC location

for certain SKUs

• Identify SKUs where shipment-based models

are better than consumption

• Centrally forecast using shipment statistics

• Improve current process

and identify changes that

enable wider usage

Consumption-based

forecasting

• Enforce tool and model compliance;

monitor and reduce over-rides

• Implement changes to CRM

– Merchandising profiles

– Customer-specific shipment profiles



What is Demand Sensing?

Key Capabilities for Demand Sensing

• Demand pattern recognition

who is buying what, when, and in what quantity?

• Forecast Optimization

How does the sales plan translate to orders?

• Optimal demand steering

if demand patterns suddenly change, and you do not

have enough of product A, can product B be used as

a substitute and can customers be steered to that

product instead?

• SKU level forecast serves as an indicator of

the future

• Shipment history serves as an indicator of

the past

• Open customer orders and POS data serve as

the indicator of present market activities

Key Inputs

Demand Sensing is a demand-driven, customer-centric approach to planning and execution that aligns process with customer demand.

Example:



Demand Management Vs. Demand Sensing

Demand Management Demand Sensing

Primary

Purpose

Long term strategy and sales forecast,

Better manufacturing planning

Short / Mid term, tactical forecast, Better

replenishment planning to one, or a few, key

retail customers

Data UsedShipments from manufacturer’s DC to

customer’s DC

POS and in store inventory data

Completeness

of Data

Across all customers Across one, or a few, key retail customers

Rolling

Forecast Time

Horizon

Rolling monthly forecasts over a year Rolling daily forecasts over a year

Key Forecast

by Time Period

Consensus demand plan for +18 months

horizon

Next week’s or month’s replenishment plan to

the DCs

Key Drawback

Susceptible to Bullwhip Effects in

operations causing increase in the cost

of time money and resources

Many retailers lack sufficient in store inventory

accuracy to make this feasible but “Big Box”

retailers are ready.



How Does Demand Sensing Work?

Demand Planning

Open Orders

Other Demand

Streams:

POS, CPFR

Demand Sensing Algorithm

Supply Planning

Optimized

Demand Plan

Forecast

Orders

Orders, Customer

DC inventory,

promotions etc..

Multi-variable sensing

and smoothing

statistics to refine

shipment forecast by

DC



Forecast Segmentation will replace

“one size fits all” approach

Deployment0-6 weeks

Operational planning 6-26 weeks

Strategic planning 6-36 months

Multi-variable

sensing and

smoothing statistics

to refine shipment

forecast by DC

Statistical consumption models by

customers translated to shipment

forecast by DC

Supplemented with regular

collaborative validation with

largest customers

Statistical shipment models generate direct shipment forecast by DC

Shipment trends

supplemented with

category growth

trends, share trends,

and growth strategy

Recommended Forecasting Process

Daily Weekly MonthlyMonthly

High volume

items and low

volume items

with high

forecastability

Low volume

items with low

forecastability

Forecast Segmentation

Demand Sensing InfluencedHigh Low



Demand Sensing Value Realization

• Operational Financial Goals– Reduce working capital costs

– Improve customer service

– Minimize production costs

– Increase network capacity

– Improve cash flows

• Organizational Goals– Streamline Demand Planning Process

– Improve KPI’s

– Improve Financial Planning



Flash Poll

Do you want to learn more on the benefits

of Forecast Segmentation?

Yes

No












Business

Process

People

Technology



Demand Planner Activities – Where should they spend their time and how will we enable?

Demand Planner Time Allocation

Current Target

Source: Based on Spinnaker’s client experience

IT Related Activities 35% 10%

(Includes data collection / validation)

Statistical Forecasting 15% 10%

Modeling 10% 10%

Building intelligence 20% 35%

Alignment Consensus 20% 35%

Demand Sensing

has greatest

influence



Training Assessment

• Define Roles

• Establish benchmarks

• Assess organization capability and knowledge using best practice competencies

• Prepare skill gaps & role inconsistencies

• Document maturity gaps from best practices

• Document training plans per person

• Prepare group training curriculum

• Prepare training plan per person and associated Gap Closure

• Action Plan

GAP Analysis

Training Plan

Our Approach to Organizational Readiness



Demand Planner Competency

• Organizational gap analysis is measured for both the Demand Planning organization as well as the Demand Planner

• By doing this, organizations can identify strengths, weaknesses, and opportunities at several levels within the organization



Is Your Organization Ready For

Demand Sensing?

Planning Maturity Graph:

• Baked in or budget numbers

make up forecast

• No demand planning system in

place

• No S&OP process

• No formalized Demand

Consensus

• Manual forecasting process

• Demand planning system

implemented

• Formalized Demand

Consensus process

• Unrefined S&OP process in

place

• System driven statistical

modeling

• Measuring forecast accuracy

and bias consistently

• Formalized demand planning

system in place

• A robust streamlined S&OP

process encompassing all

levels of the organization

• Utilizes advanced statistical

modeling methods such as

MLR

• Runs simulation to determine

“best fit” stat models

• Manual but formalized CPFR

process in place

• Efficient Demand Consensus

process

• Formalized demand

planning system utilizes bolt

on applications to assist

with forecasting (i.e.

Demand Sensing)

• Standardized IBP process

with executive sponsorship

and involvement

• Advanced statistical

modeling methods which

harmonize POS and

shipment data

• Standardized demand

consensus process

• Demand Planning process is

driven by exception

management

TIME

PR

OC

ES

S M

AT

UR

ITY

Unaware

Aware

Functional

Skilled

Recommended

Level



Flash Poll

Where is your organization on a Demand

Sensing Maturity Curve?

• Unaware

• Aware

• Functional

• Skilled












Business

Process

People

Technology



SAP’s Enterprise Demand Sensing

EDS – Enterprise Demand Sensing DSiM – Demand Signal Management

APO – Advance Planning and

Optimization

ECC – Enterprise Central

ComponentIBP – Integrated Business Planning

SCM – Supply Chain Management



SAP DSiM and EDS Overview

Key Capabilities:

• Excel Front End

• What If Scenario Capability

• Normalization of Data Streams

• Faster Performance

• Delivers Demand Visibility

• Predictive Analytics

• SAP Integration

DSiM

EDS



SAP’s Enterprise Demand Sensing Integration



Monthly / Weekly Forecast

Sales Order, Shipments,

Master Data

External Feeds:- Point of Sale- Market - Social Media- Distributor- Wholesaler- Other Information

such as Weather

Demand Planning

DSiM

ECC

Hana Based

Adjusted Forecast6 week Horizon

Adjusted Forecast 6 week Horizon

Adjusted Forecast6 week Horizon

SCM - APO

SAP’s Enterprise Demand Sensing in a

SAP landscape

Inventory Optimization

Deployment Planning

Supply Network Planning

SNP/IBP

DSiM – Demand Signal Management EDS – Enterprise Demand SensingECC – Enterprise Central ComponentSCM – Supply Chain ManagementAPO – Advance Planning and Opt.

EDS

Demand Sensing Algorithms



Non SAP Environment

Demand Sensing Algorithms

Output Option 2:Extracted and stored in a CSV format

SAP Hana Platform

EDS

Output Option 1: SAP Data Services to export to external systems

Inputs via :- CSV- Excel- Data Services- Data Generator

SAP’s Enterprise Demand Sensing in a

non-SAP landscape

DSiM – Demand Signal Management EDS – Enterprise Demand SensingSAP – Systems, Applications, Products

External Feeds:- Point of Sale- Market - Social Media- Distributor- Wholesaler- Other Information

such as Weather

DSiM

Non SAP Environment - Master and Transactional Data



Flash Poll

What is your organization's interest level

in a demand sensing tool?

• Fully Optimized Demand Sensing solution

• Have a solution, requires optimization

• Interested in implementing a solution

• Unsure



Questions

&

Answers

In Closing…



Contact Information

[email protected]

877-476-0576

www.spinnakermgmt.com

mailto:[email protected]



Demand Sensing: Finding The Right Balance

Education

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