Who Loves Ya? Demand Planning or Supply Planning? (Part 2)

In Part 1 of this series, we discussed the differences between Demand Planning and Supply Planning and explored the foundation of Supply Chain Management.

The down and dirty explanation of Supply Chain Management is really just coordinating Customer Forecast (Demand Planning) with Inventory Supply (Supply Planning). This is a great explanation – cleverly simple and ingenious. But, as we discovered in the previous article, nothing is ever really that simple.

We typically say that planners and analysts have extremely tough jobs, because they work in both the Demand Planning and Supply Planning world, and they don’t always have the right tools to help with the individual puzzle pieces we described last week.

In this week’s View from the Ridge, we continue to identify additional insights that the Blue Ridge solutions provide to put together the pieces of the puzzle.

Demand Planning continued:

Advanced Seasonality

The ability to provide seasonal profiles or seasonal templates to the demand forecast has been a tool in the planner’s toolbox for some time now. However, the Advanced Seasonality function in the Demand Forecasting application of Blue Ridge Supply Chain Planning can generate and assign seasonal profiles for large groups of items.  This capability enables users to conditionally automate the process based on business rules, such as goodness of fit to the demand pattern, or to review the impacts on the forecast prior to manually assigning seasonal profiles en masse.  This means that seasonal forecast profiles can be applied by the Demand Forecasting application with or without the direct oversight of the planner.  Application of seasonal forecast profiles where necessary help assure the forecast aligns with customer demand patterns and improves service levels, by aligning inventory with the peaks and valleys in demand.  Additionally, the improved accuracy of the forecast helps lower safety stock by eliminating forecast error.

Daily Demand Forecast Profile

The evolution of seasonal demand profiling naturally led to planners having the ability to apply forecast profiles that apply to demand patterns within the week. Daily Profile creates an intra-week demand pattern by identifying a proportion of the weekly demand forecast (including seasonality, remember?)to each day of the week. This precision of forecast allows planners to predict demand more effectively and order more accurately when supplier items are purchased multiple times each week.

Trend

Trend is a feature that describes the rate of forecast change over a period of time. When speaking in terms of supply chain, I’ll often refer to it as a ‘Demand Trend Indicator’.  In truth, Trend represents the forecast’s response to a trend in customer demand against an item.  The direction and rate of forecast change is identified and will indicate if forecast change is relatively insignificant, or if the forecast is trending up or down…in what measure it’s changing.  The higher the number, the greater the rate of forecast increase/decrease.  This is insightful information to have when managing a forecast.

Trend is also used in the forecast revision calculation. It is generally thought that the longer the demand is trending, the greater the trend rate will be. However, the real value of trend is that the longer the trend (regardless of trend direction), the more weight the system is giving to current demand when revising the forecast at period end.

In the next article (Part 3), we’ll address some of tools available for Supply Chain Management. Then we will finally be able to answer the question of: “Who Loves Ya? Demand Planning or Supply Planning?

Looking for Part 1? You can read it here: Part 1