The role of “Demand Planning” has evolved over time and emerged as a distinct function separate from the more traditional “Supply Planning” or just “Planning” function with specific responsibilities. These include driving the forecasting process, validating the forecasts, developing norms for stock keeping at multiple echelons of the distribution chain, placing distribution requirements on factories and managing stock availability. The most important role is driving the S&OP process.

The role has also evolved in many companies from the Sales & Marketing side - so that special attention can be given to managing the demand and forecasts through dedicated resources so that Sales & Marketing are not distracted on this front. Hence, this is also a function that represents Sales & Marketing interests. One of the crucial decisions faced by most companies is who to assign the responsibility of forecasting.

To a Supply Chain professional, the above question may appear redundant. The S&OP process followed as a best practice by most MNCs and as adopted by supply chain professional communities puts the onus of forecasting purely on Sales & Marketing. However, the issue is not as simple as it appears for in many companies in India and abroad, the forecasts are generated by demand planning. In some companies, although marketing does the forecasting, demand planning modifies the numbers for planning purposes thus reducing the importance of marketing’s involvement tremendously.

Why should getting the so called “one set of numbers” from marketing generate so much of resistance? If the benefits are so obvious, one would think every company on earth would jump at the opportunity and implement it in their businesses. Let us for a moment assume that the supply chain professional community is biased in favour of the supply side of things and so demands the “dirty” job of forecasting (dirty because of the unpleasant fact that we can never get it right) to marketing to cover supply weaknesses. This forces us to rethink the matter with some basic questions

Operations professionals argue - Can anybody in the company do forecasting? Obviously not, in fact it will lead to chaos and disorganization within the company with each department doing their own planning. So the principle of one set of numbers to be followed is correct. The best persons who can generate these numbers are obviously marketing and sales who are closest to the market. So it should be done by them only.

One important question unanswered however is – What is the core role of Marketing? It is and will always be to generate sales and NOT to merely enter forecasts. So although “Forecasts” are the most important activity for the rest of the organization’s supply chain, it is and will always be a side activity for marketing and sales. It is to the benefit of all the participants of the supply chain especially demand planning to realise and accept this as a fact. It is also the reason why demand planning has such a crucial role to play – somebody has to ensure that the forecasts get their due importance.

In such a scenario where the most important numbers for the supply teams are to be generated by a party for which generating the numbers themselves are a side activity, how can demand planning make things happen? One option is to use the “Push” approach followed successfully by many MNCs. Get top management to show their commitment to the S&OP process by forcing it down the forecaster’s throats come what may. Supplement this with the forecast accuracy and inventory holding performance indices. This is not however easy and there is often a lack of commitment from management when it comes to taking tough calls. When pushed to the wall and marketing has to choose between marketing activities and doing the forecasts, the marketing activities always get priority and the S&OP process gets sidelined.

A good way out for demand planning is to look for ways to lessen the burden of the forecasting process on marketing to the extent possible. Provide them with an easy to use forecasting software package showing the right data in the right format to make forecasting easier. Deploy a exception diagnostic tool to ferret out only the items where attention is required – why attack items where the forecast in the previous cycle is as good as any? Re-examine the hierarchy level at which the forecast is made. It might make sense to forecast at the brand level or modular level or regional level rather than at the warehouse level. Then there could be products where marketing probably does not add much value – products which are stable and predictable where even statistical forecasts would be reasonably accurate. This can be taken on by demand planning.

Good support by demand planning especially in terms of providing a forecasting solution that strongly enables budgeting and target setting activities also along with forecasting sets the stage for marketing to be truly a part of the larger supply chain family for ensuring a successful and benefit generating S&OP process