PDF Segmentation in Demand Planning for Enhanced Forecast Accuracy

[Pages:38]Segmentation in Demand Planning for Enhanced Forecast Accuracy

Jim Davis

Jeff Metersky

CHAINalytics

Jim Davis, CPIM

Director, Demand Planning & Customer Service at Colgate-Palmolive (Global Customer Service & Logistics)

Jim currently serves as Director of Demand Planning and Customer Service at Colgate-Palmolive. Jim has more than 34 years of supply chain experience at Colgate including manufacturing, planning, customer service and logistics. Prior to joining Colgate's global supply chain team, he lead the US Customer Service and Logistics organization.

His current responsibilities include global process ownership for demand planning and customer supply chain collaboration.

Jim holds a Bachelor of Science in Industrial Engineering from Lehigh University and an MBA in Operations Management from Fairleigh Dickinson University.

Jeff Metersky

Vice President, S&OP Practice Chainalytics

Jeff is a co-founder of Chainalytics and Vice President of the Sales & Operations Planning Practice. His global consulting experience ? which spans more than 100 clients across a variety of industries ? is focused on supply chain design and analysis, inventory strategy and optimization, demand planning, and cost-to-serve analytics.

Jeff has authored multiple articles and is frequently cited by leading industry publications and analysts. In 2006, Jeff was recognized as a "Pro to Know" by Supply & Demand Chain Executive.

Jeff holds a Bachelor of Science in Industrial Engineering from The University of Illinois and a Master of Business Administration in Materials and Logistics Management from Michigan State University.

Applying Segmentation to Evaluating Forecast Accuracy

Forecasts Drive the Majority of Demand & Supply Planning Decisions in Most Manufacturers

Product Flow

Orders to

Suppliers, & forecasts

of orders

Produ ction Plans &

Production Staff Planning

Financial Planning Marketing and Promotion Planning

Production Schedules

Plant ship to Retailer DC's

Deployments To Field

Distribution Cen ters

DC Staff Planning

Outbound Trans

Planning

? Financial Planning typically uses aggregated forecasts ? Demand Planning relies on a mix of aggregate and SKU-specific

forecasts ? Supply Chain management mostly uses quite detailed forecasts:

o SKU / Shipping location / day or week

VMI service of Retailer DC's

& DSD service

to stores

Forecasts Of

Product Sales

Customer orders

Inventory & POS Data

Improving Item-Location Forecast Accuracy Drives Operational Efficiency

Company

Channels Categories Networks

Sales Regions

Customers

Brands

Product Groups

Echelon Levels

Locations

Time Buckets

Yearly

Quarterly

Ship-To's

Items

Monthly

Weekly

Today's Demand Planning Environment

Supply Chain Pain Points(1)

Demand and Supply Variability Top Pain of Supply Chain

Leaders...and its increasing

SKU level Forecast Accuracy(2)

75% 74%

72% 72%

76%

79%

77%

72% 74%

72% 74% 73%

74%

74% Demand Planning performance improvements

68%

are mixed...mostly down/flat

69% 68%

1 Month

Lag

2 Months

Lag

4 Months

Lag

Consumer Products

1 Month

Lag

2 Months

Lag

4 Months

Lag

Food and Beverage

67%

1 Month

Lag

2 Months

Lag

4 Months

Lag

Industrial Products

2000-2004 2005-2009

(1) Supply Chain Insights 5/13 Survey of 92 Companies (2) IBF Research Summer 2011

Traditional Benchmarking has Not Provided a Path for Improvement

100%

Forecast Accuracy (FCA)

Conventi9o0%nal Surveys

? Questionnaire-based ? Participants self-repo8r0t%forecast accuracy as

they measure it ? Forecasting process checklist ? Attempt to define best practice ? Limited root-cause and comparative analysis

70%

Lag 0

83%

Lag 1

81%

Lag 2

79%

Lag 3

77%

60%

63%

50%

? Can I really improve this much? ? If so, where and how can I improve?

40%

30%

0

0.5

1

1.5

54%

2

2.5

43%

3

3.5

40%

4

4.5

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