Executive Briefings

Demand Planning: Taking Its Rightful Place in the Supply Chain

Dr. Chaman L. Jain, professor of economics in the Tobin College of Business at St. John's University, talks about how the demand-planning function has changed in his decades of observing global supply chains.

Jain has been observing the industry for more than 30 years, having launched the Institute of Business Forecasting's quarterly Journal of Business Forecasting in1981. Since that time, he says, forecasting has become a much more important factor for companies of all sizes. Those that failed to understand the need for forecasting were missing key opportunities, he says, adding that perceptions have changed in the ensuing years.

Another major change over the past three decades has been the move away from "siloed" organizational structures. Under such a setup, each function works independently, with little or no communication among them. Jain cites the example of Volvo in 1998, when its marketing department launched a promotion to sell off an excess inventory of green cars - but failed to communicate that effort to production, which assumed that it needed to make more of that type.

Jain traces the evolution of companies from animosity among silos to an environment of consensus-based forecasting. In leading companies today, he says, "all functions get together."

Merely sitting down together doesn't solve the problem, however. Once a company comes up with a consensus forecast, it needs to act on it. So begins the transition to the ultimate means of achieving forecast accuracy among all participants: sales and operations planning. The effort, says Jain, involves demand and sales planners, sign-off by the executive committee and especially collaboration with the end customer. "They have the information you need," he says. "Otherwise you're simply guessing."

Internal dissension hasn't gone away completely. According to a recent IBF survey, 49 percent of upper management is committed to the collaborative forecasting function. "Others don't care or are lukewarm," says Jain. "If they don't value the importance of forecasting, how can you have collaboration? The conflict among functions is still there."

To view video in its entirety, click here


Keywords: IT supply chain, IT supply chain management, value chain IT, supply chain solutions, supply chain systems, demand planning and forecasting, supply chain planning, supply chain collaboration, collaborative forecasting, siloed organizations, sales and operations planning

Jain has been observing the industry for more than 30 years, having launched the Institute of Business Forecasting's quarterly Journal of Business Forecasting in1981. Since that time, he says, forecasting has become a much more important factor for companies of all sizes. Those that failed to understand the need for forecasting were missing key opportunities, he says, adding that perceptions have changed in the ensuing years.

Another major change over the past three decades has been the move away from "siloed" organizational structures. Under such a setup, each function works independently, with little or no communication among them. Jain cites the example of Volvo in 1998, when its marketing department launched a promotion to sell off an excess inventory of green cars - but failed to communicate that effort to production, which assumed that it needed to make more of that type.

Jain traces the evolution of companies from animosity among silos to an environment of consensus-based forecasting. In leading companies today, he says, "all functions get together."

Merely sitting down together doesn't solve the problem, however. Once a company comes up with a consensus forecast, it needs to act on it. So begins the transition to the ultimate means of achieving forecast accuracy among all participants: sales and operations planning. The effort, says Jain, involves demand and sales planners, sign-off by the executive committee and especially collaboration with the end customer. "They have the information you need," he says. "Otherwise you're simply guessing."

Internal dissension hasn't gone away completely. According to a recent IBF survey, 49 percent of upper management is committed to the collaborative forecasting function. "Others don't care or are lukewarm," says Jain. "If they don't value the importance of forecasting, how can you have collaboration? The conflict among functions is still there."

To view video in its entirety, click here


Keywords: IT supply chain, IT supply chain management, value chain IT, supply chain solutions, supply chain systems, demand planning and forecasting, supply chain planning, supply chain collaboration, collaborative forecasting, siloed organizations, sales and operations planning