At its simplest, effective Demand Planning means reducing the gap between held inventory and actual sales. It’s about meeting demand in the most efficient way possible to help retail organisations avoid stock-outs at one end of the scale, and wastage at the other. Yet this vital role is often drowned out by louder voices in other areas of the business. (Yes, we’re looking at you, Marketing).
When businesses DO decide to elevate Demand Planning, the inclination is usually to focus on getting back to basics. But the problem with “basics” is that they are just that - rudimentary, and limited in their capability to help you move forward with increased insight and accuracy.
Stats Vs Data
Traditionally, organisations have looked to sales figures, along with consumer buying patterns and seasonal cycles, to help them make demand forecasts. This approach is always based on information that has already been generated and is retrospective in nature. Once upon a time, it was all that was available and alongside long periods of market stability, it helped businesses make more accurate forecasts.
Enter an explosion in e-commerce activity. Suddenly, consumers were leading the charge on how they researched, sourced and bought items. Next, unforeseen events disrupted the norm and put a fire under the trend away from bricks and mortar shopping. This customer-led volatility has put many businesses on the back foot, and those who continue to fall back on outdated forecasting methodology to fix the issue are never going to catch up or even better, get ahead of the curve.
The good news is that this online activity provides enormous amounts of invaluable data, not just about what consumers are doing, but about what their intentions are. By correlating their activity with Big Data, we can see how changes in everything from the weather to building regulations and national sports team performance affects their purchasing habits. Apply this to your Demand Planning and suddenly, you have a system that can not only analyse information, but accurately predict activity.
Putting the right technology in the right hands
The best way to empower a Demand Planner is to give them the right tools. An accurate forecast can give any business a serious competitive advantage. But step one is aligning business units behind a solid consensus plan. The outcome will be reduced inventory holdings AND increased stock availability.