Demand management is a critical tool for procurement professionals and companies in general. Its implementation for the consulting category is a no-brainer if you want to keep your spend under control and aligned with your strategy. But what are the key steps that can ensure successful Demand Management execution? Below we have mapped out the steps in implementing Demand Management that you can easily apply too.
“Don’t lower your expectations to meet your performance. Raise your level of performance to meet your expectations. Expect the best of yourself, and then do what is necessary to make it a reality.” -Ralph Marston
1. The Purpose and the Challenge–
Demand management is a supply chain management system that balances and strategically aligns demand with operating capability across the supply chain through the rapid and successful integration of the market needs in the direction of the suppliers. In short, it makes sure you are spending on the right priorities. The challenge of it often lies with its successful implementation for companies that are not well-prepared and fail to deliver the expected results.
2. Have a Clear Strategy –
The driver for the demand of Consulting should be projects closely aligned with the strategic direction of the Company. Executives have to translate the strategy into the Demand Management principles and decision-making process. A clear strategy will simplify this work and facilitate the buy-in of the top Management.
3. Use Effective Decision-making Approach –
All projects cannot be viewed the same way. The Company has to define a segmentation of the potential needs in Consulting and the associated Decision-Making Process. It will include a threshold for projects to be handled directly, as well as the person including in the decision for each segment.
4. Have a Proper Budget Limits Defined –
The budget constraints are a critical element of Demand Management. You need to agree, at the highest level of the Company, on how much money you want to invest in Consulting, and what are your expectations in terms of returns.
5. Your Degree of Centralization Choice –
The important questions to answer here are: What needs to be done? And who is best suited for the role overseeing the process? Management requires some degree of centralization of the consulting budgets or at least the decision to proceed. To ensure good synergy between Consulting Investments and Strategy, many companies have given the accountability to manage the demand for their strategy or transformation teams. This role can be located at the Corporate or BU level. Or both depending on thresholds and company culture.
6. Get Top Management’s Support –
The Implementation of Demand Management is very likely to change the ways of buying Consulting Services. Most executives will be reluctant to lose flexibility from“before.”Beyond the project, the Top Management has to openly support and push for the DMS to ensure that the principles and processes will be respected across the board.
7. Create Alignment for a Successful Demand Management Launch–
You need to focus on creating alignment. It’s properly done when you formalize the target process. Methodologies and prioritization criteria have to be clear and fair, to allow proper consolidation and treatment. Once the key stakeholders are aligned, you can communicate with your teams.
Ideally, you can try some dry runs on historical data or with your largest units and fine-tune the methodologies. Then consolidate project assessments and resources requirements, and set a deadline for demand management to start.
8. Prioritize Projects and Launch Immediately –
As with many other things, it’s a smart approach to prioritize your projects and start with the most important ones immediately. Other attractive, or “nice to do” projects, are placed in a pool and prioritized based on budget feasibility. Small projects (under the threshold) are left to the discretion of the management (resource permitting).
Any demand above a certain threshold has to be addressed by either the strategic or the indirect procurement team.
9. Simplify Based on Results –
Strict governance is mandatory on all projects with the possibility to kill projects, not yielding satisfactory results. Therefore, it’s mandatory to analyze the results. At the end of each project, you should lead a post-mortem analysis to assess the performance of the Consulting Firm.
You will also check if the priority criteria were justified enabling a virtuous cycle. Depending on the results, the strategic team will adjust the decision-making process, the panel of Consulting Firms and the procurement team will adapt the panel of Consulting Firms available for further work.
10. Review the Projects’ Sequence-
Positioning your projects sharply over the course of the year is a key element that is often underestimated. Make sure you have a good balance between transformational projects and projects, generating short-term results that can help you to do more with less. In other words, some cost savings projects can unlock enough resources to kick-start a digital transformation.
11. Adjust Costs into 1 or 2 Fiscal Years –
It is sometimes tricky for Companies to finance major Consulting Projects over the course of a fiscal year. If the costs are in year 1and the results in year 2, the bottom line is impacted. A better way to do that is by spreading the costs. For example -to circumvent this unfortunate situation is to start projects after the summer break. With a 60 days payment term, if you accrue for costs, you will spread them over two years, and if you don’t, there is a good chance you will start paying in January, and the cost vs benefits will end up positive. Even if you don’t get the impact on the earnings, you will get the cash.
12. Apply Successful Practices –
The key element is to find the balanced mesh between the core principles of Demand Management, the specificities of the Consulting Category, and the Company Culture. If the system is too rigid, Executives will work around it. If it is too flexible, the Company will not get the full benefits of the system.
13. Have Effective Communication with Suppliers –
Last but not least, you have to communicate with your suppliers. Explain why and how you will implement Demand Management and how it will impact them. They need to understand the new rules to play along with them. Demand management is a well-known tool for procurement teams. But the implementation for intangible categories such as consulting is not always easy. But implementing these above simple steps will get you closer to a best-in-class consulting sourcing capability.