1. © The Delos Partnership 2007 page 1 Creating the visibility to manage the crisis Developing a proper Demand Planning and Management process

2. © The Delos Partnership 2007 page 2 Balancing the objectives Inventory Customer Service Manufacturing Costs Manufacturing Flexibility

3. © The Delos Partnership 2007 page 3 Why is a Forecast needed ? Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Cumulative Lead Time Customer Places Order here Forecast needed to cover this

4. © The Delos Partnership 2007 page 4 Forecasts Provide Business Plan Forecasts Vision and strategy Finance Shareholders Resources

5. © The Delos Partnership 2007 page 5 Forecasting – Definition A forecast is a formal request to the Supply Management function… From Sales and Marketing to have the product, materials and Capacity available according to the quantity and At the time that they anticipate the demand will occur from the Customer to ship the product to their premises

6. © The Delos Partnership 2007 page 6 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply One set of numbers !

7. © The Delos Partnership 2007 page 7 Demand Management Sometimes actual demand is different from forecast demand ! Abnormal demand should be identified A realistic promise should be given to customers Risk of losing customer needs to be balanced against upsetting others!

8. © The Delos Partnership 2007 page 8 The Forecast is the Driver of the Business The Role of a Forecast Helps Plan resources (equipment, people, materials, services) Develop and support sales targets Capture marketing information Reach consensus on the support needed Strategic and Business planning Vital for communication

9. © The Delos Partnership 2007 page 9 The Ten Rules of Forecasting 1.A forecast is never going to be right 2.A forecast is necessary for planning supply, supporting financial and business plans 3.Accountability for the forecast rests with Sales and Marketing 4.A forecast is wrong because the assumptions were wrong 5.Forecasting needs an application of intelligence 6.More accurate forecasting comes from your customers’ customer 7.Forecasts at an aggregate level are more accurate than the detail 8.Effective management of demand is key to managing forecast inaccuracy 9.A written policy for managing flexibility is essential 10.Measuring forecast accuracy will improve the process

10. © The Delos Partnership 2007 page 10 Forecasting Needs a Simple Process FilterDemand Computeforecast CaptureActual C O N S E N S U S F O R E C A S T C O N S E N S U S F O R E C A S T Hold Demand Review Agree commercial plans plans Agree Exceptional demand Assumptions written down and agreed ReviewAccuracy

11. © The Delos Partnership 2007 page 11 3. Execute Statistical Forecast Forecast should use history to produce trends and identify patterns Key influences to be detected :  Base  Trend  Seasonality A Statistical Forecast is useful in saving time for high volume items

12. © The Delos Partnership 2007 page 12 Forecast Accuracy Report - MAPE GroupProductForecastActualAbs Error% Error Product Group A Product 12310012020 Product 4562001505025 Product 7893003303010 Total600 10017 % Product Group B Product 34520030010050 Product 56750030020040 Product 89060070010017 Product 678200400200100 Total1500170060040 %

13. © The Delos Partnership 2007 page 13 Sales Forecasting: Inputs New Customers New Products Cannibalisation Pricing Plans Promotions/Advertising Customers Own Forecast/Plans Competitors’ Activity Government legislation Economic Factors – interest rates/Exchange rates

14. © The Delos Partnership 2007 page 14 Customers’ Own Plans 1.Where possible get forecast from customer to feed direct into own ERP system 2.Use ATP logic to “protect demand”. 3.Manage changes to demand through formal process.

15. © The Delos Partnership 2007 page 15 Assumptions AssumptionOwner Pricing Economy Brand position Competition ……………..

16. © The Delos Partnership 2007 page 16 COLLABORATIVE FORECASTING CPR Collaborate Plan Replenish SEAMLESSSEAMLESS CUSTOMER OUR COMPANY Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply One set of numbers ! Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply One set of numbers !

17. © The Delos Partnership 2007 page 17 Simulation – a key to better planning What if upside ? What if downside ?

18. © The Delos Partnership 2007 page 18 Item External Sales Trading Allowances Material and Labour Costs £ ‘000 Gross Margin Promotional Spend Net Contribution Manufacturing Overhead Admin Overhead Trading Profit Management Interest NET PROFIT FORECAST Distribution Resources Planning Master Production Schedule Material Requirements Planning Capacity Requirements Planning Vendor Scheduling Marketing Sales Logistics Finance Production Purchasing Financial Planning Cost Management Cost Management VolumeValue One Business Forecast

19. © The Delos Partnership 2007 page 19 Demand Control CheckForecast Check Abnormal Demand ReceiveOrder 100 % delivery to promise Give Customer a promise Check ATP Agree Lead time for Abnormal demand ConsumeForecast It was Not In the forecast

20. © The Delos Partnership 2007 page 20 All incoming customer orders should be screened (evaluated) for normal/abnormal demand characteristics. Abnormal Demand

21. © The Delos Partnership 2007 page 21 Abnormal Demand Policy Company needs to have a policy that states the process and mechanism for identifying and dealing with abnormal demands Accountability needs to be established with Sales and Marketing - the originators of the Forecast ! Abnormal Demand Policy

22. © The Delos Partnership 2007 page 22 Demand Planning versus Demand Control PLAN MANAGE EXECUTE Cumulative Lead Time Add or subtract To capacity Strong Link to Integrated Enterprise Planning Process Capacity and Materials “firm” Release Orders Demand Controller Demand Planner

23. © The Delos Partnership 2007 page 23 Objectives of Integrated Enterprise Leadership Vision and Strategy supported by : One set of numbers at all times Integrated Plans Realistic Plans Visibility and transparency [3-5 years] Teamwork Decisions made in timely fashion More planning, less fire-fighting Consistent performance measures Delivery of the strategy Top Down and bottom up

24. © The Delos Partnership 2007 page 24 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

25. © The Delos Partnership 2007 page 25 Integrated Enterprise Leadership ACTIONACTION Week 1Week 2Week 3Week 4 Innovation Review Innovation Review Customer Demand Review Customer Demand Review Supply Plan Review Supply Plan Review Priority Review Priority Review STAGE 1 STAGE 2 Senior Team Review Senior Team Review STAGE 5 STAGE 7 STAGE 4 STAGE 3 Support STAGE 6

26. © The Delos Partnership 2007 page 26 Characteristics of IEL process Formal set of meetings Agendas “pre-set” Linked series of meetings Focus on right decisions being made at right level Preparation not “thank goodness for the last minute” Facts not opinions Focus on Long-term and not short-term.