Cross-Functional Demand Planning Integration

I was interviewing a bright candidate for a demand planner role a while back. To gauge his practical thinking, I posed a scenario. "Imagine your system generates a baseline forecast of 10,000 units for a key product next month. The statistical model is sound. What's your next action?" He gave a textbook-perfect answer about reviewing historical trends, model accuracy, and checking for outliers. All crucial steps. I paused. "That's an excellent start. But what if that 10,000, as precise as it looks, is missing the most critical piece of information?" He seemed curious, waiting for the answer. This is a scenario I see play out in many organizations. We invest heavily in sophisticated forecasting systems that are brilliant at analyzing the past. But they often lack forward looking context. A forecast is just a number until we enrich it. Many industry studies highlight that forecasts relying purely on historical data can often miss the mark significantly, sometimes by as much as 30-40% for more volatile items. The plan becomes a mathematical exercise, disconnected from the commercial realities on the ground. This is where the concept of Demand Enrichment becomes invaluable. It is the structured process of layering qualitative intelligence on top of the quantitative baseline. In a previous role, we transformed our forecast accuracy not by buying new software, but by changing our process. Our statistically generated forecast was our starting point, not our destination. We built a simple but disciplined enrichment framework: - Collaborative Input: We worked with the sales team to capture insights on key account promotions, new listings, or potential risks. This wasn't a casual chat; it was a structured input into the plan. - Marketing Integration: The marketing team’s activity calendar was overlaid onto the demand plan. We could now quantify the expected uplift from a specific campaign instead of just hoping for the best. - Market Intelligence: We dedicated a small part of our demand review meeting to discussing competitor activity and market trends, translating these discussions into tangible assumptions in our plan. Suddenly, the number had a narrative. 10,000 units was no longer just a point on a graph. It became "10,000 units, which is composed of 8,500 baseline sales, an anticipated lift of 2,000 units from the 'Summer Sale' campaign, offset by a potential 500 unit loss due to a competitor launching a similar product." This enriched number is something the entire organization can understand, align on, and execute against. It transforms the forecast from a passive prediction into an active planning tool. ----- If you have any questions about Demand and Supply planning, feel free to ask using the links in the Bio. P.S. How does your organization go beyond the numbers to tell the full story of your demand?

Did you realize that inventory is completely interconnected with every other part of the supply chain? Procurement decisions, production schedules, warehouse operations, transportation capacity, and customer demand patterns all feed into it. That interconnectedness can make inventory tricky to manage because it doesn’t just pop up out of nowhere and move on its own. It’s the result and reaction to all decisions made upstream. When your functional areas (procurement, production/manufacturing, warehousing, transportation, distribution, sales, forecasting…) aren’t aligned, inventory (and ultimately your customer) ends up carrying the consequences. Let me give you an example: If supplier lead times extend but reorder points don’t adjust, the business has no choice but to hold more inventory to protect service. Production reacts by running longer batches to “get ahead,” which ties up product in forms that don’t always match what customers are ordering. That excess then moves downstream, where warehousing takes the hit in terms of holding the wrong product at the wrong locations, holding too much inventory, or having to use extra labor to keep product moving. Transportation is next in line with having to expedite shipments, moving product to different locations to position inventory in the right spots, or mode/capacity issues related to inventory discrepancies. Then, this doesn’t match the sales or forecasting plans that were set at the start which kicked off the whole S&OP process. Cross-functional integration is about preventing these disconnects before they cascade through the system. Yes, that does start with understanding your processes and how the impacts can cascade... BUT… it's ultimately about matching your inventory to the reality of your supply chain capabilities. Procurement sets order cycles in step with production schedules. Production builds to demand signals, not just efficiency goals. Warehousing plans space and labor against expected flows. Transportation aligns modes and routes with real demand. Sales makes commitments that the rest of the chain can back up. For small and mid-sized businesses, cross-functional integration can start with consistent communication and discipline across functions, built around a few key questions: 🔵 Procurement — are supplier cycles aligned with both demand and production schedules? 🔵 Production — are we building to demand signals or just running for efficiency? 🔵 Warehousing — does available space and labor reflect stocking policies and flows? 🔵 Transportation — are modes and routes aligned with where demand is actually occurring? 🔵 Sales/Forecasting — are customer commitments and projections grounded in operational capacity? The takeaway is simple: inventory is the mirror of cross-functional alignment. If it feels like you’re always carrying too much in one area and scrambling in another, the issue isn’t necessarily inventory. It’s the misalignment of your upstream integration.

Integrating SAP Advanced Variant Configuration (AVC) with SAP Integrated Business Planning (IBP) can help enhance the efficiency and accuracy of your supply chain and production planning processes. Here’s a high-level overview of how this integration can be achieved and the benefits it offers: Integration Overview 1. Data Synchronization: • Ensure that the master data (products, configurations, bills of materials) in AVC is synchronized with IBP. • Use SAP Cloud Platform Integration (CPI) or other middleware to facilitate data exchange between AVC and IBP. 2. Configuration Rules: • Define and maintain configuration rules in AVC, ensuring they are available for use in IBP for planning purposes. • Configuration profiles and constraints must be consistent across both systems to ensure accurate planning. 3. Demand Planning: • Utilize IBP for demand planning to capture customer requirements and forecast demand for configurable products. • Transfer demand data to AVC to generate appropriate product configurations based on forecasted needs. 4. Supply Chain Planning: • Use IBP for supply planning, taking into account the variant configurations defined in AVC. • Plan for component and sub-component requirements based on the configured products. 5. Order Fulfillment: • Integrate order fulfillment processes, ensuring that orders captured in S/4HANA with AVC are reflected in IBP for accurate planning. • Ensure real-time visibility of order statuses and inventory levels across both systems. Technical Steps for Integration 1. Set Up Data Integration: • Use CPI or SAP Data Services to map and transfer data between AVC and IBP. • Configure integration flows to handle master data, transactional data, and configuration rules. 2. Configuration of IBP: • In IBP, set up planning areas, key figures, and planning views that accommodate configurable products. • Incorporate constraints and rules from AVC into IBP planning models. 3. Testing and Validation: • Perform rigorous testing to validate that configurations in AVC are accurately reflected in IBP planning scenarios. • Conduct end-to-end tests to ensure that demand and supply planning processes work seamlessly across both systems. 4. Monitoring and Maintenance: • Set up monitoring tools to track data integration processes and handle exceptions. • Regularly update configuration rules and master data to ensure ongoing alignment between AVC and IBP. Benefits of Integration 1. Enhanced Planning Accuracy: • By integrating configuration data, IBP can more accurately plan for variant-specific demand and supply requirements. 2. Improved Efficiency: • Automated data synchronization reduces manual efforts and errors, improving overall process efficiency. 3. Better Decision-Making: • Real-time data integration provides a comprehensive view of the supply chain, aiding in better decision-making. 4. Increased Agility: • The integration allows for quick adjustments to configurations.

“That is not my number. That is finance’s number.”   Hearing this phrase is a sure sign that something is broken in your planning process. Unfortunately, all too often, budgeting and planning is disjointed and disconnected, and not everyone is on the same page. This is why financial solution vendors have made a big push to support Extended Planning & Analysis (XP&A) over the last few years. Having one platform to support both your financial and operational planning helps break down silos. It makes it easier with the right culture and processes to ensure everyone is on the same page, and you do not have to walk into a meeting and hear that is not my number or, worse, have each group share a different number for ARR or ACV because everyone is using a different data source. Last year, I was fortunate enough to work with Lucanet as an external advisor when they acquired Causal as part of their commitment to providing an XP&A platform for their customers.  As they are launching their XP&A offering, let’s talk about XP&A and how you implement it in your company. If you are looking to move to a more connected, continuous planning process, the tips below should help on your journey to XP&A ➡️ Review and assess your current planning processes ➡️ Define what XP&A means for you and what it looks like (Vision & Objectives) ➡️ Break down silos & build cross-functional teams where needed ➡️ Align processes so strategic, financial, and operational planning support each other ➡️ Ensure data is accessible across the org ➡️ Implement technology that supports forecasting and scenario planning   In the comments, let me know what you have found to be the most challenging part of keeping planning aligned across the organization. If you would like to learn more about how Lucanet thinks about XP&A go here https://lnkd.in/diiPUEEq