Consumption-Based Forecasting and Planning

CHAPTER 2A Wake-up Call for Demand Management

Demand management concepts are now over 30 years old. The first use of the term demand management surfaced in the commercial sector in the late 1980s and early 1990s. Previously, the focus was on a more siloed approach to demand forecasting and planning that was manual, using very simple statistical techniques like moving averaging and simple exponential smoothing, and then Excel, and a whole lot of “gut feeling” judgment. Sound familiar? In the mid-1990s, demand planning and supply planning were lumped together, giving birth to supply chain management concepts—demand planning and integrated supply chain planning. Essentially, nothing has changed over the last 30 years other than more focus on planning supply (shipments), using inventory buffer stock to manage variation in the supply plan, and focusing on collaboration. There is very little, if any, focus on advanced analytics and downstream data.

As a result of the current disruptions, supply chain professionals are quickly realizing that their supply chain planning solutions have not driven down costs and have not reduced inventories or speed to market. Companies globally across all industry verticals have actually moved backwards over the course of the last 30 years when it comes to growth, operating margin, and inventory turns. In some cases, they have improved days payable, but this has pushed costs and working capital responsibility backwards in the supply chain, moving the ...