Executive Briefings

Aligning Supply and Demand Through Consensus Planning

Far too many companies still lack coordination between those in charge of generating and managing demand and those in charge of ensuring supply. When demand and supply are not coordinated, it leads to ludicrous situations such as the manufacturing plant building more inventory while at the same time marketing is reducing price to get rid of inventory. Sales and operations planning is meant to break down these walls between operations, sales, marketing and finance in order to align supply and demand, but typically suffers from inaccurate input forecasts and long (monthly) cycles resulting in stale plans that don't incorporate the latest information. Sales is not held accountable for forecast accuracy and is not incented to help align supply and demand. Best practice in consensus planning includes:

• Smart Reconciliation of Forecasts
• Fast Cycle Planning
• True One-number Planning

Due to biases, conflicting incentives, differences in knowledge of events, and different approaches to forecasting, there will be differences in the accuracy of forecasts generated by different people (e.g. sales, marketing, planners, etc.) using different methods (statistical, account based) at different levels of granularity (monthly vs. weekly, SKU vs. family, account vs. region). Consensus planning tries to reconcile these intelligently to produce a more accurate forecast used across the firm to drive planning and execution.

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Far too many companies still lack coordination between those in charge of generating and managing demand and those in charge of ensuring supply. When demand and supply are not coordinated, it leads to ludicrous situations such as the manufacturing plant building more inventory while at the same time marketing is reducing price to get rid of inventory. Sales and operations planning is meant to break down these walls between operations, sales, marketing and finance in order to align supply and demand, but typically suffers from inaccurate input forecasts and long (monthly) cycles resulting in stale plans that don't incorporate the latest information. Sales is not held accountable for forecast accuracy and is not incented to help align supply and demand. Best practice in consensus planning includes:

• Smart Reconciliation of Forecasts
• Fast Cycle Planning
• True One-number Planning

Due to biases, conflicting incentives, differences in knowledge of events, and different approaches to forecasting, there will be differences in the accuracy of forecasts generated by different people (e.g. sales, marketing, planners, etc.) using different methods (statistical, account based) at different levels of granularity (monthly vs. weekly, SKU vs. family, account vs. region). Consensus planning tries to reconcile these intelligently to produce a more accurate forecast used across the firm to drive planning and execution.

Read Full Article