In a recent benchmarking report on demand management by Gartner, they discovered that only 17 percent of respondents indicated that they forecast at the stock keeping unit (SKU), location and customer planning level. Supply Chain Digest further reflects on the finding of the report and surmises how the link between retail data back through the supply chain needs to improve: “Use of demand-sensing technology that leverages downstream data, pattern recognition and predictive analytics will provide more accurate near-term demand projections for more consumer goods companies.”
Is this approach a holy grail outside the reach of most players when reviewing their supply chain management processes?
Depending on where you sit in the supply chain, demand forecasting will mean slightly different things and have various implications on what insight you are putting into the mix – Tech Target helpfully clarifies this but also highlights the emerging practice of “collaborative demand generation” throughout the supply chain, which encourages data flow and interpretation up and down the chain.
Why demand forecasting matters and what you can do
It may be stating the obvious, but for both manufacturers and distributors, inventory management has a major impact on profit margins, cash flow management, customer service levels, waste reduction and product obsolescence, time-to-market and revenue generation.
In today’s increasingly challenging customer landscape where your audience is no longer content to wait and fit around your timescales (as your competition will be offering the better alternative) – it is no longer ok to say that inventory forecasting is “not for us, not right now”.
There are different ways to ensure you get the right product to the right place in the right quantity at the right time.
Multiple factors (internal and external) affect optimum inventory management, not all happening at the same time and not in a linear fashion. Organisations can look backwards at empirical data when forecasting demand, but this must be overlaid with understanding audience and sector behaviours. Trend analysis on consumption patterns must not finish with straight sales figures or stock flow but be combined with probability modelling based on a 360 degree view.
Dependent on the shape of your business model (i.e. ratios of products to customers to salesforce) your business management system needs to integrate sales and marketing pipeline analysis with your manufacturing and warehouse data.
ERP solutions such as Microsoft Dynamics AX enable reliable and accurate forecasting information to be fed back into planning, projects and operations. Dynamics AX 2012 R3 demand planning tools allows manufacturers to better align their product mix to what is selling and what is likely to sell.
Demand forecasting needn’t be cumbersome and complex as this video illustrates and technology such as this releases the burden on your operations team and helps organisations track and adjust inventory at various stages of the distribution cycle.