demandplanning-collaborative

[demandplanning-collaborative]

Demand Planning —Probability of an accurate Collaborative Forecast

The probability of an accurate collaborative forecast depends on the accuracy of the forecast as well as proper and timely communication. Probability of Correct Collaborative Forecast = Prob (Correct Forecast) * Prob (Proper and timely communication)

Collaboration Accuracy

Perfect communication and poor Forecast ==> Collaboration accuracy= 0

Good Forecast and untimely communication ==> Collaboration accuracy= 0

In the Manufacturer to retailer model, the collaboration process is based on the assumption that the retail customer can help create a better forecast for the manufacturer. This is because the customer is close to where the retail takeaway occurs. They understand consumer buying patterns better and have a vast database of store-level demand and promotional information.

Secondly, point of sale (POS) information is easily forecastable since retail consumption is generally a smooth series. Volatility occurs only when there are unexpected economic or natural events. A case in point will be battery sales around before hurricanes.

Finally, the collaborative relationship allows you visibility into your customer’s planned programs. Key events will include promotions like features, tabs, price rollbacks as well as changes in inventory policy.

If you would like to find out more details on facilitating or developing a collaborative planning proces.

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Demand Planning —Test of Collaboration

Is there good Communication between collaboration Partners?

Honest and open communication. This should be clearly spelled out in the up-front business agreement. If there are constraints here then there is little chance the collaboration effort will succeed

Frequent and timely communication. This is key. Communication forums, teleconferences, or in-person meetings, should be set up for periodic exchange of information. This may be weekly by phone or monthly in person or whatever the parties think is optimal depending on their industry and business considerations

Are they communicating the right information?

Forecast Content. The process design should clearly outline what should be in the forecast that is shared. What items are included? What time period is covered? A clear process design and buy-in by both parties at the start will substantially help the success of the process

Accuracy of the Forecast. As with any demand planning process, forecast accuracy is the key. Achieving forecast accuracy depends on the accuracy of the information that is shared as well as timeliness. If the demand information that is shared by the customer is inaccurate, a tight collaborative relationship will spread this incorrect forecast throughout the supply chain

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[demandplanning-collaborative]

Demand Planning —Collaboration Planning

Some retailers focus on the Sales or the POS forecasts, while others focus on promotional forecasts alone. Again some Retailers focus on starting the process with two different forecasts, while others emphasize the importance of a Shared Single Forecast.

More formally, collaboration planning is defined as the creation of a shared understanding between two participants where none had previously existed or could have come to on their own.

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Demand Planning — Collaborative Planning

In the manufacturer-to-retailer model, customer collaborative partnerships have been a dominant theme since the 1990s. Although there was a lot of energy behind CPFR, manufacturers and retailers are adopting different versions of collaborative forecasting and replenishment strategies now. These include Collaborative-VMI, CPFR, Account Based Forecasting, CMI, Shared Single Forecast, replenishment, etc.

The Retailers have emphasized the adoption of Collaborative Planning for better forecasting promotional volume. So there is a broader adoption of CPFR and Account Based Forecasting in this space although there is no consistent standard among either manufacturers or retailers. The CPFR that is being preached by retailers also varies in flavor from one retailer to the other and between Mass, Food, and Drug.

Some retailers focus on the Sales or the POS forecasts, while others focus on promotional forecasts alone. Again some Retailers focus on starting the process with two different forecasts, while others emphasize the importance of a Shared Single Forecast.

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