Demand planning needs alignment across multiple departments, but the question of where it should sit, within Supply Chain, Sales, or as a separate function, has been debated for years.
While it’s often placed in either supply chain or sales, there’s growing support for establishing it as a distinct, strategic role. Let’s explore the pros and cons of each approach.
Supply chain ownership: When demand planning sits within the supply chain department, the focus tends to be on optimizing operations and managing inventory levels. Supply chain teams have visibility into production capabilities, lead times, and logistics, making them well-suited to develop demand plans that align with these constraints. However, this focus on operational efficiency can sometimes cause a disconnect with the commercial side. Supply chain teams might prioritize cost reduction over customer service, leading to stockouts or slower responses to market changes.
Sales ownership: In some companies, demand planning is owned by the sales team. This can create a stronger connection to customer needs and market trends, as sales has first-hand insights into customer preferences. Sales-driven demand planning often leads to better service levels and faster responses to shifts in demand. The downside? Sales teams tend to focus on short-term targets, which can inflate forecasts. This can result in overstocking and inefficiencies, as sales-driven forecasts may prioritize revenue goals over operational feasibility.
A potential solution is to establish demand planning as a separate, cross-functional role that operates independently of both sales and supply chain. Here’s why:
Balancing competing priorities: A separate demand planning department can balance the needs of both supply chain and sales. It focuses on operational efficiency while ensuring customer demand is met. This prevents bias toward one department’s goals, resulting in more accurate and balanced forecasts.
Cross-functional collaboration: Demand planning requires input from various departments like finance, marketing, sales, and supply chain. By being independent, demand planners can better coordinate across teams, ensuring the forecast is realistic and aligned with the company’s overall objectives.
Linking to financial and marketing planning: Effective demand planning doesn’t just affect supply and sales—it’s also closely tied to budgeting, marketing, and financial planning. A separate demand planning function can align with marketing campaigns to prevent stockouts, and with finance to manage inventory and cash flow efficiently.
Who should own the demand management process? By Arkieva: https://blog.arkieva.com/demand-management-process-ownership/
Sales vs supply chain: where should planning reside? By IBF: https://demand-planning.com/2023/05/22/sales-vs-supply-chain-where-should-planning-reside/