Balancing Customer Sales, Demand Sensing & Procurement-What's this you ask me? Read on to find out.

I've been told that procurement specialists are the best liars. Now if that's a lie or not I really can't comment on it much. Wondering where I'm headed at with this? Well, in a healthy debate with an erstwhile sales cum business development professional and presently in human resources; I would beg to differ on this. Now withstanding the incessant focus on customer focus; would definitely recognise the fact that there's little to debate with them on this. 

So what do you think the buzzword on customer-centricity is all about: customer is king, customer satisfaction and customer delight? Well, these are definitely what firms ought to achieve for profits and sustenance alike. How does this relay back to supply chains? Scenario one-let's say it's a new product coming to market and thus post a market reseach the product needs to go out to the masses. For such a scenario where the product's reliance is on a go-to market strategy it is imperative for a firm to ensure a requisite amount of the finished goods are already in place. Implying production of goods and a sizable amount of inventory. Here's where procurement tends to come into the picture and given time to produce the product an excess amount of raw materials, sub-assemblies and assemblies per se all are required for the in-house production of goods. A missing material and there's a good chance of no good produced at all. So what do most soucing and procurement professionals do then? They go ahead and purchase adding buffers. This is purely to ensure parts are in place for production, however limited to no intel ino the nature of projected sales and a demand sense ensures excess inventories. 
Scenario two is a case in point when it isn't a new product per se but a running requirement of products and variants for a pre-determined customer's sales projections. If the firm produces 5 products with 10 raw materials going into it, in addition to 3 sub-assemblies and 2 assemblies with 1 variant each; well then the respective set of material requirements sourced from various vendors across the globe-relies on immense planning for accuracy and timeliness. You would consider a chance of a shortage here more often than an excess. Probably not always true though. Going back to the opening line-procurement specialists tend to lie. A lot. A hell lot. So, you would expect excess inventories here too, as an additional set of parts are bought for no mindful reason apart from the burden of being responsible for a production halt. What would be the solution in both cases? Easier said than done-planning and incusivity of all relevant stakeholders alongwith precision in sales projections, demad sensing and finally relayed to a procurement with negligible buffers.
What's a sales projection? Let's say the very same product erstwhile was limited to 3-4 geographic locations and is looking to expand immensely into a new location. This is selected on the basis of a market research alongwith the intel of the sales professionals. A sense of the demand is picked up-now this is key. Firms would rather consider a sales projection to be equivalent as demand, however that's incorrect. To put it simply, sales projection is a rough-cut projection of how much possibly, can be achieved in sales. It turns to be a target as well in many firms but is a misnomer (to be addressed in another post on budgetting) So, demand sensing however is a method to arrive at how much is the demand for the product and that essentially is the key base target. A sales projection would be in terms of forecasting and coupled with market research; demand sensing is a requirement on the nature of products needed at a particular time period. This is what ideally ought to be worked upon as targets as well as for production plans. 
Now once this is carried out the production plans need to be taken into cognisance aligned with how much capacty is in place for production as well as resources. The requisite amount of data ought to be worked out and finally reach the procurement professional's desk ready to consider for purchasing from vendors. This process in itself is dictated by requirements and of course agreements. Depending on any fluctuation in the demands the product procurement alters. However for a recurring product and steady flow of product volumes this should ideally and practically not have any unforeseen constraints. So, in a nut-shell the balancing act of sales fulfillment with sales frecasting, demand ensing, production capacity and procurement in itself is a task that requires inclusivity, planning and above all cooperation amongst all stakeholders for data sanity and execution. (More on this in the coming posts)

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