Demand management is both a stand-alone process and one that is integrated into Sales and Operations Planning (S&OP) or Integrated Business Planning (IBP). The definition of the process and components covered in this section describe the current best practices encompassing the methods and competencies that have a track record of success with leading companies today. Much effort is put into more esoteric financial or academic approaches; however their practical value is limited by the ability of business practitioners to use on a regular basis. As those methods become more accessible and part of regular use they join the best practices, “predictive forecasting” covered in this section is a great example.
Demand management in its most effective form has a broad definition well beyond just developing a “forecast” based on history supplemented by “market” or customer intelligence, and often left to the supply chain organization to interpret. Philip Kotler, a noted expert and professor of marketing management notes two key points: 1. Demand management is the responsibility of the marketing organization (in his definition sales is subset of marketing); 2. The demand “forecast” is the result of planned marketing efforts. Those planned efforts, not only should focus on stimulating demand, more importantly influencing demand so that a company’s business objectives are achieved.
The components of effective demand management, identified by George Palmatier and Colleen Crum, are: 1. Planning Demand; 2. Communicating Demand; 3. Influencing Demand and 4. Prioritizing Demand.
Demand Control
Demand Control is a principle of the overarching Demand Management process found in most manufacturing businesses. Demand Control focuses on alignment of supply and demand when there is a sudden, unexpected shift in the demand plan. The shifts can occur when near-term demand becomes greater than supply, or when actual orders are less than the established demand plan. The result can lead to reactive decisions, which can have a negative impact of workloads, costs, and customer satisfaction.
Demand Control creates synchronization across the sales, demand planning, and supply planning functions. Unlike typical monthly demand or supply planning reviews, Demand Control reviews occur at more frequent intervals – daily or weekly – which allows the organization to respond quickly and proactively to possible demand or supply imbalances.
Time Fences
The Demand Control process requires that all functions agree on time fences within the planning horizon, which should be no less than a rolling 24 months based on Integrated Business Planning best practices. A time fence is a decision point within a manufacturer’s planning horizon. Typically, three established time fences exist within a company:
- Future Planning Zone – Supply is managed to match demand
- Trading Zone – Demand is managed to match supply for production
- Firm Zone – Demand is managed to match supply for procurement
Demand Controller
A Demand Controller is established when a company implements a Demand Control process. Unlike a Demand Planner who focuses on long-term order management, the Demand Controller is responsible for short-term order management, focusing specifically when demand exceeds supply or demand appears to be less than planned, and engages sales management in both situations. The Demand Controller works across multiple functions involved in the supply and demand processes, including demand planning, supply planning, sales, and marketing.
