The larger an organization is, the less it can rely on Excel and Access for demand planning, says AMR's O'Marah, because "when the numbers get large, the answers are often counterintuitive." But Excel remains a common tool, even for organizations that have enterprise-class systems. For example, Scott Roy, director of demand planning at Well's Dairy, uses Excel to refine the company's demand forecasts. He then uploads the changes to the Prescient BI system that maintains the demand plan and compares it to POS data from Wal-Mart. Other staffers use the Prescient system directly; however, Roy says its rigid interface makes for a slower process.
IT will need to customize and integrate demand-planning tools based on the kind of POS data received and on the business rules to be applied to that data. Such tools also require "a lot of maintenance" to reflect product, distribution, supplier, and marketing changes, says Lisa Plaskow, director of solutions marketing at Manugistics.
"We advise customers who feel they have a handle on the forecasting process that tools from these vendors do work well to build forecasts, but that a broader sales-and-operations-planning process is essential to give business judgment a chance to tune forecasts and react to events," O'Marah says.
IDC's Ferrari further cautions that the tools that help integrate ongoing sales data with forecast models are still evolving. "A lot of the supply-chain vendors are moving in that direction, so the question [that IT must investigate] is timing and integration," he notes.
Share With Everyone Involved
A demand-driven supply chain is not a one-way street. Organizations should be able to monitor processes and product status both up and down the chain, as well as provide that information to their partners, so everyone has as much context as possible to make any changes in manufacturing, distribution, or marketing. "Think of it as a dynamic network," says AMR Analyst Alison Smith.
Sharing data requires trust, which means companies can't ask for more than they need just in case demand rises. "Our position with suppliers is that we will give them visibility to everything we know. We give our best forecasts. We don't inflate our demand requests," IBM's Paterson says.
Similarly, Wal-Mart "gives suppliers the same visibility as the buyers and replenishment managers to information such as item performance, in-stock merchandise, and insight as to where the item is in the supply chain," says Wal-Mart Spokeswoman Christi Gallagher. "Having access to every item's performance at every store for every day for the past two years enables Wal-Mart and the supplier to jointly manage their business at the lowest level of detail."
Just as retailers and product makers should share their demand plans, manufacturers should share their production schedules, Waheed says. For example, if a product maker knows whether its suppliers' factories are running at full capacity, it can know whether to meet demand by finding alternative providers or by requesting increased production, DePalma says.
Likewise, if manufacturers can see that a particular model is selling much better than expected, they can prepare to reconfigure manufacturing in anticipation of the product maker altering the product mix to respond to the unexpected sales trend.
The demand-driven approach also requires a win-win relationship across the supply chain. Unlike the business-to-marketplace systems of the late 1990s, which focused on driving down supplier prices, demand-driven collaborative systems require that everyone benefit from the efficiencies the systems seek to identify and exploit, Ferrari says. Even if the IT infrastructure is in place, demand-driven supply chains won't work without those shared business rules and expectations.
In the above story, Blue Agave was originally misidentified. The article has been corrected.