Demand Planning Audit: A Checklist

A demand planning audit is a structured review of how a company forecasts demand, sets inventory targets and makes planning decisions, and the most useful ones are not about finding fault but about finding the two or three changes that would improve results most. This checklist is written for planning leaders, operations heads and finance leaders who want to review their own process, or to prepare for an outside review. It follows eight areas: governance and ownership, data, forecasting method, measurement, inventory policy, the cross-functional process, tools and people. Each area has questions to ask and signs of a problem. A scoring approach with checked arithmetic helps you compare the areas and choose priorities. It is part of demand planning and inventory optimization, follows outsourcing demand planning and the inventory and forecasting health check, and leads to a demand planning case study and planning transformation. For the finance view, see cash flow management.

How to use the checklist

Answer each question with evidence, not opinion. Where possible, look at actual documents, reports and data, and speak to the people who do the work. Score each area from 0 to 3: 0 means absent or not working, 1 means partly in place, 2 means working with gaps, 3 means working well and reviewed regularly. Record what you found. Do the audit with a small group from planning, sales, operations and finance so that the findings are shared and not contested.

1. Governance and ownership

• Is there a named owner of the demand plan with authority across functions?
• Are roles for forecasting, approval and purchasing written down?
• Is there a calendar for the planning cycle, and is it followed?
• Are decisions and changes recorded with reasons?
• Are targets for forecast accuracy, service and inventory agreed and reviewed?
• Is there an escalation route when functions disagree?

Signs of trouble: several versions of the forecast, no one accountable for accuracy, and decisions made by whoever shouts loudest.

2. Data

• Are item master data, costs, units and lead times complete and checked?
• Is sales history adjusted for stockouts, returns, promotions and one-off orders?
• Are the history, inventory and orders consistent across systems?
• Is there a named owner for each dataset, and are errors tracked?
• Are lead times compared with actual receipts at least yearly?

Signs of trouble: planners rebuild data by hand each month, and nobody trusts the numbers. See how to build a clean data foundation for planning.

3. Forecasting method

• Is the method chosen by product segment, or is one method used for everything?
• Are seasonality, trend, promotions and events handled explicitly?
• Is there a process for new products, with analogs and scenarios?
• Is the forecast produced at the level where decisions are made?
• Are manual adjustments recorded with reasons and owners?
• Is there a baseline benchmark, such as a moving average, to compare with?

Signs of trouble: the forecast is last year's sales plus a percentage, and adjustments are made without explanation. See SKU-level forecasting.

4. Measurement

• Are forecast accuracy and bias measured, by segment, at the lead time that matters?
• Is forecast value added measured for each step?
• Are service measures such as fill rate and in-stock rate tracked?
• Are inventory measures such as days of supply, turnover and aged stock tracked?
• Are results reviewed in a regular meeting, and do they lead to actions?

Signs of trouble: no accuracy measurement, or measurement without consequences. See forecast value added and forecast bias.

5. Inventory policy

• Are safety stock and reorder points based on demand and lead time variability?
• Are service targets set by segment, and are they linked to margin or criticality?
• Are order quantities set with minimum order quantities and costs in mind?
• Is there a process for reviewing excess and slow stock?
• Are parameters reviewed at least twice a year?

Signs of trouble: safety stock set as a fixed number of weeks for all items, and a growing list of aged stock. See safety stock formula and excess and obsolete inventory.

6. Cross-functional process

• Does a monthly meeting bring together sales, marketing, operations and finance?
• Is the meeting based on a prepared pack, with a decision list?
• Is the demand plan reconciled with the financial plan?
• Are promotions, launches and price changes in the plan?
• Is supply feedback, such as constraints and lead times, used in decisions?

Signs of trouble: the meeting reviews the past and decides nothing. See financial reconciliation in S&OP.

7. Tools

• Does the tool support the methods and hierarchies you need?
• Is the workflow clear, with an audit trail?
• Are spreadsheets controlled, documented and backed up?
• Is the integration with ERP and other systems reliable?
• Are the tools used as intended, or bypassed?

Signs of trouble: shadow spreadsheets everywhere and a tool that planners avoid. See demand planning software and when your ERP forecast isn't enough.

8. People and skills

• Are the roles clear, and do people have the skills for them?
• Is there training and development?
• Is there a succession plan or cover for key people?
• Do planners have the time to analyze and not only produce numbers?
• Are incentives aligned with accuracy and service, not just sales or unit cost?

Signs of trouble: one person holds all the knowledge, and planners spend their time on data entry. See demand planning team structure.

A scoring example

Suppose an audit gives the following scores out of 3 (illustrative): governance 2, data 1, forecasting method 2, measurement 1, inventory policy 2, cross-functional process 1, tools 2, people 2. The total is 2 + 1 + 2 + 1 + 2 + 1 + 2 + 2 = 13 out of a possible 24, or 13 / 24 = 54 percent. Check: eight areas times a maximum of 3 gives 24, and the scores add to 13. The three areas with a score of 1, data, measurement and cross-functional process, are the priorities, because they limit the others. Better data and measurement will make the forecasts and policies better and show whether changes work. A working cross-functional process turns the plan into decisions. Score the areas again after six months to see progress. Do not treat the percentage as a precise measure; use it to focus attention and compare over time. A score alone does not tell you the value of fixing an area: link each priority to a benefit, such as inventory released or service improved.

From findings to actions

For each priority area, write down the problem, the evidence, the proposed fix, the owner, the date and the measure of success. Separate quick wins, which can be done within weeks, from structural changes, which need projects. Quick wins often include correcting lead times, flagging stockouts in history, starting to measure bias, fixing the agenda of the monthly meeting and clearing the oldest stock. Structural changes may include redesigning the forecast process, changing the team structure or investing in tools. Share the findings and the plan with those involved. See planning transformation.

Doing it yourself or with help

You can run this audit internally, which builds understanding and costs only time. The risk is that people close to the process may see it less clearly or be reluctant to challenge colleagues. An outside reviewer brings experience from other companies and independence, but needs access and time. Some companies do a self-assessment first and then bring in help for the areas that score lowest. See the inventory and forecasting health check for what an outside review covers.

Common mistakes

Auditing only the forecast and ignoring the process and data misses the causes. Scoring on opinion, not evidence, produces comfortable results. Treating the audit as blame creates defensiveness. Producing a long report with no priorities leads to inaction. Not following up means the checklist is filed away.

FAQs

What is a demand planning audit?

A structured review of how a company forecasts demand, sets inventory policy and makes planning decisions, to find the changes that would help most.

What should a demand planning audit cover?

Governance, data, forecasting method, measurement, inventory policy, the cross-functional process, tools and people.

How often should I audit my planning process?

At least yearly, and whenever the business changes materially, for example after a merger, a new channel or a system change.

Can I do the audit myself?

Yes. Use evidence, include several functions and consider an outside view for the lowest-scoring areas.