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Demand planning can be the most difficult yet the most important element in the entire Executive S&OP process ... for financial purposes as well as for operational validity, forecasts should be prepared first at a volume level rather than at a mix level ... there is a defined process for demand planning within the Executive S&OP framework.
In more than a few companies, the Demand Planning step can be the most challenging of all the five steps within Executive S&OP. (See Figure 1). Frequently, different groups within the Sales and Marketing side of the business "view the world" quite differently when it comes to future demand. We see this frequently within consumer products companies. For example, one company we're familiar with has this situation:
* The Sales Department has a very customer-centric view, focusing on individual mass merchandisers such as Lowe's and Home Depot; and retail buying groups such as Ace Hardware. Some call this the "sales channel" view. It tends to be largely a short-term view and highly detailed stock-keeping unit by customer and location, for example.
* The Marketing people are focused on product lines, the "brand view." They typically are looking farther into the future and are concerned with upcoming promotions, price changes, market share issues, and the like.
* The Merchandising folks think primarily in terms of which items will be promoted and when, the "product" view. This view is frequently quite granular at the SKU level
* In that type of environment the most difficult task is to reconcile. Here's the potentially hard part: these three different views must be reconciled into one single agreed-upon sales forecast, which is reviewed and authorized by the senior sales and marketing executive(s). However, in a smaller company where the functions of sales, marketing, merchandising, etc., are combined into one department under one executive, this need not be a major challenge. In larger organizations that have this kind of organizational structure, it can be the toughest part of the entire implementation. Treat this issue as a potential show stopper, and thus give it plenty of respect, time, and brainpower.
So, it's almost never often neither a software issue nor a data problem. It's a people issue. As with so many other aspects of...