“How can I move the ball down the field, if I don’t have the ball?”
A Question from my Training Class this Week
“How do I know if I am ready for cool technologies? Especially demand sensing and shaping?”
A Demand Planner for a Large Multinational Pharmaceutical Company
Last week was a blur. It was a series of days on planes, trains and automobiles. Unfortunately, it was one of those weeks with pressing deadlines when nothing goes right. I rescheduled my Monday to meet with a client on a pressing deadline and worked through the night to edit and refine the reports/journals for last week’s newsletter. I also continued to work on the manuscript for the book Metrics That Matter to publish in the fall of 2014. The book is now a very worn manuscript.
At the end of the week, we hosted a networking call of the Shaman’s Circle. This is a networking group that meets by phone once a month. No technologists are invited. It is designed to be business leaders talking to business leaders. Each session has a topic. This week’s topic was cool technologies. In preparation for the call, I had given the group a list of emerging technologies that I am watching and I asked each person to come to the call ready to talk about technologies that they are working with. I wanted it to be a discussion about cool technologies, but we quickly got into the subject of adoption.
During the call I got asked a question that made me stop and think. The question was, “Lora, we are a late adopter. We are not comfortable being on the bleeding edge. How do I know if I am ready for these new technologies? Especially demand sensing?” I thought that this was an excellent question. It is frequently asked. So, I am going to focus here and share my answer:
Demand sensing is the application of analytic technologies to detect short-term patterns in channel data and translate it into distribution requirements. It replaces rules-based consumption in demand planning, and will improve short-term forecasting by 30-35%. The data can be structured or unstructured.
It makes a difference. The average client that has implemented demand sensing technologies has reduced inventory by 11%. So, you might ask, why is this not a no-brainer? The answer might surprise you. Here goes:
-Sales Wants to Manipulate the Data. When sales is incented to move product into the channel, they want to touch the forecast and expedite shipments to make bonus incentives. They are uncomfortable trusting their fate to a black box.
What do you do about it? Find an advocate within sales to help sponsor the project. Help to educate the sales force and consider modifying sales incentives for the first three quarters to let the shipments even out to a pull-based signal. The short-term impact for one to two quarters can be a reduction in shipments even though case fill and end-level consumption will rise. Make sure that this is not a surprise.
-Break Paradigms. Traditional Processes Encourage Bias and Managerial Overrides. The implementation of demand sensing puts the fate of the company in the hands of an optimization tool. It will drive a better answer than managerial overrides; but, for companies that have encouraged managerial overrides and consensus forecasting without the discipline of forecast value-add, expect for it to be a battle.
The answer? Take it slow. Prove that it works and educate the team on how the “touching of demand data” actually reduces demand accuracy. Be deliberate. Communicate often.Understand that people will be uncomfortable.
-It Is All About Influence Management. Be very clear on the goal and work to increase advocacy in finance and sales. Make the project a win-win. Yes, it may decrease short-term sales, but in the longer-term it will increase customer service, reduce inventory and improve the execution of new product launch and trade promotions. Who doesn’t want this?
The answer might surprise you. When I was asked the question this week of “How can I move the ball down the field if I don’t have the ball?” My answer was for the team to help the other teams understand the rules of the game and work to move the ball down the field together. Not everyone understands supply chain; and for many, a discussion of demand sensing will sound like gobbledygook.
The success rate is highly influenced by this pre-work. Sell the project internally and find an advocate. And, yes, many companies fail before they succeed. Does this mean the technology is bad? No. It just means that the company didn’t take the right steps to get ready. Remember, many organizations do not understand the basics of demand management. Don’t take it for granted.
Would love to hear your thoughts. I will be landing soon in Philadelphia. Spending the weekend writing and then off to New York to work with a client and then speaking later in the week at a conference. I hope to see you in my travels!