Where is the place of demand management in the organization?
Filed in archive Point of view on October 19, 2007
I got into an interesting discussion the other day about the position of Demand Planner. The question was simple: Where should we put demand planner? in Procurement? Sales? Operations? or supply chain?
Apart from the general statement that "Of course it depends on the type of the product and the nature of the industry", I myself were interested to find a specific answer for this question. In this respect, it is good to review the general job description for demand planning.
Demand planners are usually responsible for gathering the data from sales department and also product plans and then translate them into buying plan (and production plan on high level?). If we expect this from demand planner, then it might be a good idea to put the demand planner in sales department. This looks like a good idea specially in organizations which are supply driven (Like pharma players).
On the other hand, this view has a problem inherent in it: Sales people have short term point of view and they usually don´t want to lose a sale so they tend to over-do the demand planning and change the data. That´s why they might not benefit as much as they expect from their demand planning activities: Forecast errors will remain unchanged in the most optimistic scenarios!
That´s why I suggest to put this position in supply chain division. Demand planning is a task which needs input and collaboration with different functions: Sales, Production, procurement and quality. Supply chain people usually have the holistic point of view which is necessary to collaborate with other functions. They also have a more long-term point of view which prevents them from over-planning.
What do you think? Do you agree with me?
Tags: supply chain management scm operation sales demand management logistics organizational design organi
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Response from:
Randy Littleson
(10/19/07 7:51pm)
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One of the biggest challenges I see in an organization is that for too long the responsibilities for demand, supply and product have been organizationally separated and, thus, it further promotes the "silo" mentality of dealing with these issues. Someone creates the demand plan, throws it over the wall to someone else to create the supply plan, etc. The integration of product into this equation is usually the most troublesome and least integrated.
With things changing so fast, the need to integrate these three functions more tightly has never been more critical to the success of the business. Each process along requires a lot of collaboration to derive the right demand plan, for example. Then there's the critical need for cross-functional collaboration - ensuring that the demand planning participants are actively collaborating with the supply planning and product planning participants.
The historical approach has been to focus on planning the business. Today's reality forces you to acknowledge that you must be more demand-driven and in doing so you have to realize that you can't plan the customer. The key to thriving in this environment is through more active organizational integration and by empowering people with the visibility and tools they need to both collaborate and rapidly respond to change.