6.5-Minute Read

Welcome to our four-part series on utilizing customer relationship management (CRM) data to inform and enhance your sales and operations planning (S&OP) process. Over the next few posts, we’ll explore this concept for leadership decision-making that leverages data which is typically not considered in operations and demand planning. Follow along:

  1. Using CRM Data to Improve Your S&OP Process
  2. Can CRM Fit Into Your S&OP Demand Planning? (this post)

Recapping the CRM–S&OP Concept

In our last post, we discussed the idea of using customer relationship management (CRM) procedures and tools in your sales and operations planning (S&OP) process. The aim is to better understand future demand patterns during this volatile time. While some industries boomed as a result of the pandemic, many others didn’t. The historical methods of forecasting demand are no longer accurate predictors for what’s ahead, particularly as the pandemic continues to surge. However, before this concept can be put into practice, some fundamental questions must be asked to determine whether CRM can fit into S&OP demand planning.

Six Considerations for Using CRM in S&OP Demand Planning

1. Who is Driving Your Demand?

One of the key requirements of integrating CRM into your S&OP demand planning is customer data. Without it, you won’t be able to understand historical patterns and dig into the information you need to make new decisions for the weeks and months ahead. But which customers are the ones driving your demand? More importantly, are you actively engaged with those customers throughout the year (either through your sales team or some other team that engages with customers frequently)?

In terms of engagement, more consistent touchpoints, sales, and other activities are more likely to be the case for B2B relationships than B2C relationships. This is because the latter is high volume. While consumer-direct sales certainly produce data and insights, you’re not necessarily building the same kind of relationship with those customers as you are with business contacts. Sales and other teams will learn more about the business’ plans, activities, needs, and so on as they communicate with their contacts, place and manage orders, etc.

2. Do You Already Have CRM Capabilities?

Note that this is for both the process of customer relationship management as well as a system. One does not necessarily include the other — they must both be developed and in active use in order for the CRM–S&OP strategy to be effective (and possible). If so, your next step is to determine whether this system is capable of being used to support S&OP demand planning.

If you don’t have a CRM process or system, this strategy simply won’t be effective because there is no data to utilize nor is there a process for acquiring and acting on it. But if you do, you likely have the capability to put CRM to use for demand planning. A related question here, however, is whether you use CRM for new as well as ongoing demand planning.

While the goal of this approach is to figure out what you should expect post-pandemic, there still remains the possibility for rapid and unexpected change. Because of this, it’s worth using this approach for ongoing S&OP demand planning as well. This way, you ensure that any shifts are more quickly accounted for and acted upon, rather than finding yourself in trouble one month after your demand planning process has been completed.

3. Is Customer Demand Data Meaningful to Operations?

Made it this far? Outstanding — you have the necessary engagement with your customers and also have a CRM process and system in place to understand and manage those relationships. Here’s the next challenge: are you able to understand customer demand at a level of detail that’s meaningful to your operations team? Remember, virtually every piece of information about a customer is important and informative for sales and service teams, but for operations, the focus is on how and why this matters for S&OP demand planning.

Data that is particularly important for operations teams is detailed information on products, product families, customer locations, and of course, certain time frames. These criteria should be combined to provide more accurate detail to augment “top-down” or statistical forecasted sales numbers that are typically input to S&OP sessions.

4. Do You Understand Customers’ Purchasing Characteristics?

While you may have an arrangement where certain parts are produced and delivered on a consistent basis, it’s likely that your customers have distinct buying habits. For example, do your customers tend to place orders consistently with a certain lead time, or are there constantly surprises like rush orders or higher- or lower-than-expected volumes? If you’re unable to meet a larger order due to timing and have to short-ship an order, do they threaten to stop buying products altogether?

This information is critical to understanding how your customers impact the S&OP demand planning process. This information should be available in your CRM along with how you responded and resolved any unique situations. Accounting for this information will enable your sales and operations teams to make more informed decisions as they review it.

5. Can You Tag Customers and Their Expected Demand by These Characteristics?

You know your customer base better than anyone else — or do you? While one sales team might have some customers that fit the buying behaviors described above, another team might not. Using data in your CRM, consider creating segments or categories of customers that fit certain criteria.

For example, you may have a segment identifier for customers who consistently order last-minute and require rush production. By separating them out, you can better understand the (likely) demand signal from the larger group of customers who aren’t constantly putting out fires (and causing fires for you). This will give you more accurate data and insight as you move forward with S&OP demand planning.

6. How Reliable Are Sales’ Demand Estimates?

Depending on the processes you have in place now, the demand estimates your sales teams are putting into your CRM system may or may not be accurate. This may be due to how they’re incentivized. Often, total volume and other higher-level metrics are used, when instead, they should be focused on specific segments as identified above and by product (at as granular a level of detail as practical). Narrowing in on this information will enable your team to have a better and more accurate understanding of what is expected from an operations perspective.

Additionally, you should constantly be evaluating demand estimates for accuracy over time. If they’re becoming more accurate, then sales is learning and applying that to what they input. If not, it’s most certainly time to re-evaluate how they’re incentivized, how demand estimates are entered, and so on.

Can’t Answer All of These Questions?

Few companies can consistently say they have the tools, knowledge, and capability to say “yes” to these questions, and that’s OK. You may be able to answer them for specific customers, products, and geographies, but across your entire organization, that might not be the case. There is good news here, however.

Even if you have one portion of your business that exhibits some of these qualities, all is not lost. These smaller slices of your business can serve as pilot tests to help prove the concept of leveraging CRM intelligence in S&OP demand planning. As long as you have some of the pieces discussed above in place, efforts made in testing this approach may just yield the short- and long-term results you’ve been looking for as you move forward in a new world.

Navigate Change with Greater Certainty

River Rock Advisors is a leading value chain optimization firm focusing on helping manufacturers and distributors identify opportunities for immediate and long-term improvement and implement them via our Operational Performance execution team. If your organization has been struggling to understand what comes next with its S&OP demand planning, we invite you to learn how we can help you develop a plan for the future.

Connect with us today to learn more about this approach.