asking people to change the way they do business.”
That cross-functional communication is important for the
success of a demand-planning initiative, according to Doug
Thomas, associate professor of supply chain management at
Penn State and an expert on demand and supply planning.
“Quite often, demand planning initiatives grow out of the
manufacturing and inventory planning side of an organization,” Thomas explains. “These people say, ‘We’d really like
to know more about what the sales force knows. How can we
do that?’” Tools like Oracle’s Demantra, which are built on the
concepts of demand planning and the related discipline of
sales and operations planning (S&OP), were first created and
have further evolved in manufacturing companies to enable that
communication.
Before Demantra applications
were implemented at Tecumseh,
three different departments—
sales, finance, and operations—
calculated material forecasts
approximately every quarter from
their own numbers. Demantra applications enabled them all to
generate monthly forecasts from a single source of data—what’s
called one-number forecasting.
The benefits of one-number forecasting helped convince
Tecumseh’s employees to use Demantra applications, according
to Howe. This improved a host of business operations, including customer service, labor variances, material variances, and
others. These improvements were borne out when Demantra
applications were initially deployed in 2009; without any
change in inputs, back-tested forecast quality improved by 20
to 30 percent.
As users realized that additional input further improved
forecast quality, they responded accordingly. “Demantra
has changed behaviors on the input side,” Howe explains.
“Salespeople now think of new ways to engage with customers,
so the input they give to Demantra is better. They’re thinking in
terms of months rather than weeks.”
That long-term view can help a company like Tecumseh get
the most value from its S&OP process, Thomas says. “The ideal
S&OP process looks three or more months into the future,”
he explains. By doing so, the focus extends beyond matching
supply and demand in the short term; it expands to include
anticipating disruptions, adjusting for changes in commodity
prices, prioritizing markets and resources, and looking for ways
to support emerging markets.
Taking a longer view also allows demand planning and
S&OP to help with risk management, Thomas points out. “If
you have a process in place where the stakeholders in an organization are engaged in a forward-looking process, you have
the necessary elements to do scenario planning and continuity
planning,” he says. “It provides the right forum to do the planning that lets you be better prepared for an event.”
MEASURING SUCCESS
The uptake of Oracle’s Demantra applications at Tecumseh has
been widespread and enthusiastic. “The reason we had grass-
roots acceptance, and the willingness to change, was due to the
shorter feedback loop,” Howe says. “Salespeople see that the
forecast impacts their own department, but they also get to see
how it impacts others. And the operations team is accountable to
the manufacturing plan, just as the sales team is accountable to
increase the forecast accuracy. That just didn’t happen before.”
While employees in each region of Tecumseh still organize
their operations in different ways, the data they collect is con-
solidated on a corporate level. This enables company leaders
to make decisions based on the
big picture; it also improves
intracompany cooperation. For
example, Tecumseh’s French divi-
sion buys parts from the com-
pany’s Brazilian division; in the
past, employees in Brazil had to
forecast France’s demand based
on history, but now that demand
is calculated based on French sales forecasts. “The S&OP
process allows us to realize what the demand is across the whole
company, to look at trends, and to devise a plan based on the
best use of resources—capital, machinery, cash, or people—like
we’ve never been able to do before,” Howe says. “It smooths out
the whole value chain and creates a lot of efficiencies.”
Oracle’s Demantra applications have also piqued interest in
some surprising corners of Tecumseh. The company’s finance
and treasury departments are investigating ways to use it for
financial and/or foreign-currency forecasting, and the purchas-
ing department is exploring how Demantra applications can
improve their ability to hedge copper, aluminum, and other
metals purchases based on sales plans.
One of the regional human resources departments is even
using Demantra applications to plan for its labor require-
ments. “My team didn’t push the HR aspect of Demantra,”
Howe says. “Someone just saw the information in the tool and
said, ‘I can use this.’”
“If you can measure the success of a system based on popu-
larity, then Demantra far exceeded our expectations,” Yenor
says. “We’ve got four or five times more users than we antici-
pated. Which, by any measure, is pretty cool.” <>
“We’ve got four or five times
more users than we anticipated.
Which, by any measure, is
pretty cool.”
—Doug Yenor, former CIO and current IT advisor, Tecumseh
FRED SANDSMARK is a freelance writer in the San Francisco Bay Area.
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