Mastering global demand planning

By William C Copacino -- Logistics Management, 8/1/1998

Five years ago, few companies managed globally. Most "international companies" managed country or regional businesses, not global business units. Over the past five years, however, as more companies have evolved into global businesses, which generally are organized around specific product groups, they have had to rethink their approach to demand planning. The complexity of this task is magnified when global manufacturing locations are serving global markets. Nevertheless, there are some important principles that can be applied by any company making the transition to a global demand planning process. They include:

c Design three processes, not one. Separate approaches are required for supply-chain infrastructure planning, annual capacity and production planning, and monthly/weekly sales and operations planning. A big mistake companies make is not recognizing that these are three distinct processes.

c Align the demand-planning processes with the way your company operates. The matrix shown above is helpful in assessing these issues.

If divisions operate independently, then design your demand-planning process by division. If divisions share manufacturing capacity and/or sell jointly to customers, then think about a common process for relevant activities such as forecasting, demand planning, production planning, and manufacturing scheduling. Similarly, you should align these planning processes with the way your businesses are organized and managed from a geographic perspective. A good starting point is to look at where your company measures profits and align your activities accordingly.

c Place process ownership as close to the source as possible. Master production scheduling, for example, is almost always a plant activity. It is not centrally managed. Forecasting generally is initiated at the local level by product group and by geographic market, and should be aggregated in a way that aligns with your business model, as described above. Similarly, production planning generally is not performed at the plant level. Instead, it must be planned in a way that is aligned with the way your business is run in terms of geography and operating units.

A key challenge in demand planning in a global, multi-divisional organization is determining who "owns" the inventory. The answer is not always simple and there are no rules of thumb I can give you here. This decision must be thoughtfully considered in your demand-planning design.

William C. Copacino is managing partner of Andersen Consulting's Strategic Services Practice for the Americas. A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Andersen Consulting's Boston office, 100 William St., Wellesley, MA 02181. Phone (617) 454-4480.