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. 𝐃𝐨𝐧’𝐭 𝐮𝐬𝐞 𝐰𝐡𝐚𝐭 𝐲𝐨𝐮 𝐝𝐨𝐧’𝐭 𝐦𝐞𝐚𝐬𝐮𝐫𝐞.
It is never good enough to assume or trust that inputs—whether a customer forecast, a syndicated data source or an individual planner adjustment—are 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. 𝐒𝐡𝐨𝐰 𝐲𝐨𝐮𝐫 𝐛𝐢𝐚𝐬.
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.
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), Gambler’s 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.
3. 𝐍𝐞𝐯𝐞𝐫 𝐬𝐭𝐨𝐩 𝐥𝐞𝐚𝐫𝐧𝐢𝐧𝐠.
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.
4. 𝐕𝐚𝐥𝐮𝐞 𝐝𝐢𝐯𝐞𝐫𝐬𝐢𝐭𝐲.
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.
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.