Demand planning process flowchart (monthly consensus forecast)

What the demand planning process flowchart (monthly consensus forecast) process is

Demand planning is the monthly cycle that produces one number the organisation agrees to: how much customers will buy, by product and by period, before anyone works out whether it can be supplied. It runs to a fixed calendar because everything downstream is waiting for it. This template maps the cycle across five lanes, Demand planner, Sales, Marketing, Supply planning and Finance, from history extraction through to the accuracy review that feeds the following month.

This chart stops at the published demand plan, and that boundary is deliberate. What supply planning then does with it, master scheduling, MRP, capacity levelling and purchase orders, sits on the supply side; the day-to-day loop of reorder points, replenishment, cycle counting and stock adjustment is the inventory management process, not this one. It is also not the whole sales and operations planning cycle: demand planning is the demand review that feeds S&OP, with the supply review, integrated reconciliation and the executive management review sitting above it. The single Supply planning step here exists to test the plan for feasibility and then to receive it, not to build the schedule.

Two decisions carry the process. 'Forecast within tolerance of plan?' decides whether the consensus number goes forward or has to be reconciled against budget first, and it only works if the tolerance is agreed in advance as a number rather than argued in the meeting. 'Accuracy within target?' decides whether last cycle's forecast performed well enough to leave the model alone. Without the second decision the cycle has no feedback loop, and the same override gets made every month by the same person for the same reason.

What this flowchart covers

In this template

• Five swimlanes (Demand planner, Sales, Marketing, Supply planning and Finance) across six phases: data preparation, statistical baseline, commercial input, consensus review, sign-off and publish, and accuracy review
• Data preparation and baseline: sales history and shipments extracted, outliers and one-off events cleansed, a statistical baseline generated, then a 'Baseline fit acceptable?' decision that either accepts the baseline or loops through a model and segmentation adjustment before rerunning it
• Commercial input gathered in parallel: the baseline is circulated once and branches to Sales for pipeline and known wins and to Marketing for promotions and launch plans, with both rejoining a single consolidation step so the cycle produces one plan rather than three spreadsheets
• A feasibility check in the Supply planning lane before the meeting, so the consensus review discusses a plan that has already been tested against capacity rather than discovering the constraint afterwards
• A 'Forecast within tolerance of plan?' decision that routes gaps to a reconciliation with sales and finance and returns them to the consensus meeting, instead of letting an unexplained gap pass straight into sign-off
• Finance sign-off against budget with a real rework branch, the approved plan published and converted into a supply schedule, then forecast accuracy and bias measured against an 'Accuracy within target?' decision that sends misses back to the model adjustment step for the next cycle

When to use this template

• You are setting up or resetting a monthly forecasting cycle and need the handoffs between demand planning, sales, marketing, supply and finance agreed before dates go into the calendar
• Sales, marketing and finance each work from a different number, and you need to show where the single agreed plan is formed and who owns it
• The consensus meeting overruns or ends without a decision, usually because nobody agreed in advance what size of gap is worth arguing about
• You are implementing demand planning in an ERP or planning tool and want the process settled before statistical settings, planning hierarchies and override rules are configured
• Forecast accuracy is measured every month but nothing changes as a result, so the feedback loop needs to be part of the process rather than a report nobody acts on

How it works

1. Rename the lanes to your real roles

   Replace Demand planner, Sales, Marketing, Supply planning and Finance with the roles you genuinely have. If the demand planner also runs the supply schedule, merge those lanes instead of drawing a handoff that never happens. If category managers rather than sales own the promotional view, put them in the Marketing lane and say so.

2. Fix the cycle calendar before anything else

   Give every step a working-day offset: history cut-off, baseline published, sales and marketing input due, feasibility check, consensus meeting, sign-off, plan published. Demand cycles fail on lateness far more often than on method, and a late input is what forces the meeting to negotiate rather than review.

3. Put your own thresholds on the two decisions

   'Forecast within tolerance of plan?' needs a stated tolerance as both a percentage and a value, and the level it applies at (total, category or item). 'Accuracy within target?' needs the measure you actually use and a target set from your own history, because volatile and stable items cannot reasonably share one figure.

4. Decide how commercial overrides are captured

   Require every change to the baseline to carry a reason, a quantity and a period, so the consensus meeting reviews assumptions rather than opinions. Keeping the baseline and the overrides separate also lets you check later whether the overrides improved accuracy or worsened it.

5. State what the plan actually is

   Write on the chart whether the published plan is unconstrained demand or already supply-constrained, whether it is in units, value or both, how far out it runs, and how new products with no history are handled. Most disagreements about a demand plan turn out to be disagreements about its definition.

6. Walk it against last month's cycle, then publish it

   Take the cycle you have just completed and trace it through the chart. Every step people describe that is missing, and every step drawn but skipped in practice, is the finding worth acting on. If it becomes a controlled procedure, route it through approval so the version people work from is the version that was authorised.

Frequently asked questions

What are the steps in the demand planning process?

Extract sales history and shipments, cleanse outliers and one-off events, and generate a statistical baseline forecast. Circulate the baseline to sales for pipeline and known wins and to marketing for promotions and launches, consolidate the inputs into one plan, and test it against supply capacity. Hold the consensus review, compare the forecast to the plan or budget, reconcile any gap that falls outside tolerance, obtain finance sign-off, publish the plan to supply planning, and measure forecast accuracy and bias so the next cycle starts better than the last.

What is the difference between demand planning and supply planning?

Demand planning produces the view of what customers will buy, independent of whether it can be supplied. Supply planning decides how that demand is met: master scheduling, material requirements, capacity, production sequencing and purchasing. In this chart the handover is explicit, at 'Publish approved demand plan' followed by 'Convert plan into supply schedule'. Supply planning appears once before that point only to flag capacity constraints, so the consensus meeting is not agreeing a number that is already known to be unbuildable.

How does demand planning fit into S&OP?

Demand planning is the demand review, the first working step of a monthly sales and operations planning cycle. S&OP as normally described also includes a product or portfolio review, a supply review, an integrated reconciliation of demand, supply and finance, and a management business review where the plan is signed off at executive level. This template covers the demand review and the local finance sign-off that lets the plan be published; if you run a full S&OP cycle, treat the published plan here as the input to it rather than the end of it.

What is a consensus forecast?

A consensus forecast is a single agreed demand number produced by combining a statistical baseline with commercial knowledge that the history cannot contain: pipeline, known wins and losses, promotions, launches, delistings and price changes. The point of the meeting is not to average opinions but to agree which adjustments to the baseline are justified and to record why. Keeping the baseline and the adjustments separate is what later lets you check whether the human input added value.

How should forecast accuracy be measured?

Measure at the level and horizon you commit to, since accuracy at total level always looks better than at item level and says nothing about whether the right stock was made. Keep bias separate from absolute error: error size tells you how wrong the forecast was, bias tells you which direction it is consistently wrong in, and bias is the part fixable by changing behaviour. Compare results against a simple benchmark such as the previous period or the baseline before overrides, and set targets from your own history rather than a published figure, because achievable accuracy depends heavily on demand volatility.