The consequences of poor demand planning and management failures have risen with shrinking product life cycles. As a result, companies are implementing a new level of demand management technology to boost profit margins by better accounting for supply chain variability.
According to research, 50% of businesses claim it takes more than a month to detect changes in consumer demand. In today’s fast-paced business world, this is unacceptable. Improved demand sensing and shaping procedures offer considerable opportunities for organizations to increase top-line sales, profit margins, and inventory levels.
Demand Planning Vs. Forecasting
Demand planning is the technique of precisely forecasting and ordering items to have the right number of sales at any given time. In addition to preventing out-of-stock situations, accurate demand planning can help businesses develop beyond their wildest dreams.
Demand forecasting is an essential component of a trustworthy plan. The technique of demand planning, which considers previous results, considers external and internal changes, and puts out what can be anticipated based on the parameters, is the reason it can reliably predict the future.
Benefits of Demand Planning
- Accuracy in revenue forecasting in the future: While forecasting demand planning, both recognized and unforeseen events are considered. Based on a company’s current inventory, a bottom-up forecasting strategy will produce what can be predicted.
- Enhancement of the shopping experience for customers: Having enough supply to satisfy demand keeps the money on the table and ensures that consumers enjoy being at the table. Satisfying demand can result in extra revenue because pleased consumers are more likely to buy from you again and refer your company to others, saving you money on retention and acquisition.
- Overstock and under-stock levels being reduced: Reducing overstock, or inventory above that required, minimizes the risk of spoilage or the need to dispose of dead stock. A systematic approach to demand planning can reduce the wastage of inventories.
- Capacity to make data-driven decisions: Businesses don’t have the information to make these without rules or expected earnings forecasts. Demand planning is an integral part of making well-informed business decisions.
- Alignment of functions in the business: When a marketer or salesperson is unsure of what products have to be sold, they can make do with what they have, but having a strategy will increase their efficiency and production, boosting the overall profitability of the business.
- Adaptability to market conditions: Markets can change at any time. An adaptive demand plan can help you stay ahead of the competition by allowing you to keep up with the changes. To even grasp if sales are the consequence of external or internal sources would require an exact demand strategy. Following that, a company must determine whether demand indicates short-term or long-term behavior.
What Hinders Demand Planning for Businesses
Demand planning relies heavily on data, the absence of which can hinder the entire planning and forecasting process. However, data is available everywhere but in an unstructured format, which, when processed properly, can help businesses with insightful decision-making and stay ahead in the competition.
Data-related challenges that hinder informed decision-making:
- Data captured from unorganized sources: Myriad partners-distributors, retailers, third-party data consolidators in varying sizes and geographical spread, with varying levels of technological maturity, deter a systematic approach to data collection and sharing.
- Data presented in varying formats: Data captured in different formats and levels of granularity cause information to fall through cracks. The inability to collate data from various sources in the value chain makes timely visibility of accurate sales data difficult. Hence, demand planning is inadequate or faulty.
- Data quality questioned: In the absence of a data validation system, the quality and reliability of the data collected are questioned. Hence, driving business insights to help with demand planning and forecasting become difficult.
- Inconsistent data availability: Inconsistency in the availability of data resulted in timely data unavailability. Hence, demand planning and forecasting on real-time data became impossible.
- Sub-optimal data synchronization: Since multiple formats and modes of data transfer are used by big enterprises, bringing all the data together on a single dashboard remains a distant thing.
- Expensive existing solutions: Outsourcing data capturing and processing to third parties came with a hefty price. But, more importantly, those data were neither real-time nor complete. Hence, acting on this data was still the ‘best guess’ decision.
Data-Related Challenges Impact Businesses Significantly
Data-related challenges not only hinder proper demand planning and efficient data-driven decision-making, but also impact businesses negatively. Lack of structured data prevents stakeholders from measuring sales vs. targets needed for efficient demand planning and forecasting. From partner onboarding to higher Non-productive inventory, among data-related challenges significantly impact businesses.
Let’s elucidate with a case study on one of EdgeVerve’s clients – a multi-billion-dollar consumer goods enterprise.
The client was looking to overcome the above-mentioned challenges, strengthen the supply chain and drive sales efficiencies through a Demand Sensing solution.
The client was looking for the following features:
- Real-time visibility of secondary sales
- Single-pane view of secondary sales, inventory, and other related data streams
- Supporting varied files formats and input data-transfer modes
- Consistent, accurate, and higher quality data through master data validation
- Managing services for partner data acquisition
How TradeEdge Market Connect Helped?
TradeEdge’s cloud-based, low-cost, pay-as-you-go solution helped the client spread their risks, enabled a quicker go-to-market, and met business goals faster than earlier. TradeEdge Market Connect is based on an end-to-end partnership model that caters to delivering, consulting, product implementing, and managing various services for the client.
With TradeEdge Market Connect, the client has seen a 4-10% improvement in sales and has automated 90% of efforts spent on data acquisition and harmonization. Near real-time visibility into secondary sales and inventory data helped the client with better demand planning and forecasting.
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