Do you know how to break your bias?
Below are our top four demand planning best practices which will not only mitigate biases and heuristics (mental shortcuts that allows people to solve problems and make judgments quickly and efficiently), but improve overall planning performance.
1. ๐๐จ๐งโ๐ญ ๐ฎ๐ฌ๐ ๐ฐ๐ก๐๐ญ ๐ฒ๐จ๐ฎ ๐๐จ๐งโ๐ญ ๐ฆ๐๐๐ฌ๐ฎ๐ซ๐.
It is never good enough to assume or trust that inputsโwhether a customer forecast, a syndicated data source or an individual planner adjustmentโare adding value. Every input should be measured.
Once a year try to get together in a room (preferably outside the office) and go over your current planning process in detail. Is there any process which you can’t measure? Is there any process where you can use a proxy to see how effective you have been? If you can indeed measure it, what is the trend of leading and lagging indicators?
2. ๐๐ก๐จ๐ฐ ๐ฒ๐จ๐ฎ๐ซ ๐๐ข๐๐ฌ.
The effect of biases is pervasive precisely because most are unconscious. By periodically measuring for biases and heuristics in contributors to your demand planning process, they are identified and can be mitigated.ย
Schedule time during your non peak busy time of the year to review planning team actions. Pay specific attention to common biases like Overconfidence, Dunning-Kruger effect (for the less experienced members in your team), Gamblerโs Fallacy, Persistent Directional Bias (Optimism/Pessimism), Cluster Illusion and False Seasonality. Review your decisions to see if you fell anytime for the Framing effect.
You can read about all these biases in our last week post.ย
3. ๐๐๐ฏ๐๐ซ ๐ฌ๐ญ๐จ๐ฉ ๐ฅ๐๐๐ซ๐ง๐ข๐ง๐ .
Demand planners should have the benefit of standardized best practices training, ideally created specifically for your organization. Ensuring that all stakeholders have the same framework to work from, especially when it includes a component of Behavioral Economics to reduce bias, raises awareness and improves performance across the organization.
There is material on the net (Google) which can help you build some simple tests for your team to upgrade.ย
4. ๐๐๐ฅ๐ฎ๐ ๐๐ข๐ฏ๐๐ซ๐ฌ๐ข๐ญ๐ฒ.
Though some personality types appear to be more heavily influenced by biases in demand planning, there are great benefits to having multiple viewpoints available in planning. Be careful not to create a homogenous team, as Groupthink and Availability Heuristics are a likely result.ย
This is a tough one. Get out of your comfort zone and have a few players in your team who challenge you on many topics. It will reap rich dividends a few seasons down the line.