Ann Grackin: Is the Crisis in Demand Management Being Exacerbated by Spreadsheet Dependency?

Demand management has always been at the top of supply chain professionals’ list of challenges. Of late, many companies have also indicated that having grappled with cost cutting a few years back, now they are more focused on growth. Predictably, 62% of the respondents sought growth through channels, 46% through more direct customers, and approximately 20% by creating new products. These goals have been supported by more channel-specific offerings and packaging and by increasing product options and selections. This year companies also increased their use of new services, trade promotions and the promotional door busters, many of which were less than stellarly executed. All these moves have added complexity to the demand planning challenge.

Companies have made their chains more complex in other ways, with supply-side changes such as outsourcing and by varying logistics methods leading to constant complaints of poor visibility. We were making progress. But surely as the problems get bigger or more complex, they do call for bigger, more scalable solutions.

Against this backdrop, it is interesting that many companies still depend on spreadsheets for demand planning and S&OP, as noted in the recent survey by APICS (see Are Spreadsheets the Answer, SC Digest, September 2013). Could there be a connection between the use of spreadsheets and the lack of visibility, poor promotional performance, and growing inventory levels for some companies? I think so. I am going to give a brief picture of recent data and draw what I think are some conclusions about the impact (or lack thereof) of spreadsheets. I am not alone in the opinion (see Red Wing Shoe Company webcast, Are Spreadsheets Sabotaging Your Forecast) that spreadsheets may not be the path to supply chain success.

Firstly, some ChainLink research data. Each year we ask our audience to tell us about their challenges and what processes and solutions they are going to invest in. We also ask them what they have installed. In comparing our research data over the years we found that those who had already bought and implemented demand planning solutions were seeing improvements in critical measures of their supply chain. Those who did not and had no plans to scored lower on critical measures. These low scorers report forecast inaccuracy, and demand planning as their biggest headaches.  Issues such as: poor ability to analyze customer demand data, such as POS; poor linkage between market demand and procurement; and poor mix, inability to spot underperforming products, and poor execution in promotions were reported.

Those interviewees who automate forecasting (see Caribou Coffee’s Supply Chain Story, ChainLink, January 2013) , S&OP, and or inventory management systems had significant critical metric improvements and  benefits from these solutions, especially in their ability to change and scale: add more products, respond to changing customer requirements, and fine tune their processes. They had faster turns, lower inventory, and better customer service. They were also more productive. This is an interesting result, since the so-called benefit of spreadsheets is their ability to allow users to be flexible to do it themselves (without IT intervention).

I recently read a very good survey by Consumer Goods Technology, focused on S&OP. And although it noted that S&OP as a process was becoming more widely adopted with benefits to the organization, many organizations (53%) were using spreadsheets to do the job. Below are several of the points that stood out as I went through the results: