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WHITE PAPERDemand planning and Forecasting:Planning is gaining in SCMPractice Head:Sunil Bajajsunil.bajaj@aspiresys.comAspire Systems Consulting PTE Ltd.60, Paya Lebar Road, No.08-43,Paya Lebar Square, Singapore – 409 051.Author:Shreyasee GhoshResearch Analysta t t e n t i o n.a l w a y s.
C O N T E N T SIntroductionEverything starts at planning the DemandPlan Demand for SCMChallenges in Demand planningAccuracyStrategyImplementationRight toolsTimingChannelsBenefitsFundamentals of Demand PlanningTimePast demandCompetitor activityMarketing effortsPricingGartner’s list of top 10 supply chain management solution providersAspire Systems - Demand planning and Forecasting: Planning is gaining in SCM2
Demand planning and Forecasting:Planning is gaining in SCMIntroductionEver changing customer demands are volatile todeal with. When you can actually forecast it, itbecomes infinitely more difficult. In a supply chainscenario, demand planning and forecasting is theadhesive that helps keep the business together fromwarehouse to retail stores. Will your customer payheed to your awesome grocery plans or would justhead to the trendiest outfits first? Most of all are youprepared for their decision? These questions can beanswered through demand planning andforecasting, making it easier for you to deliver whilecutting down on supply chain cost. Demandplanning in supply chain management has beenaround for quite some time, but the last few yearshave seen a boost in implementation of demandplanning software in SCM. According to a study byGartner, with 10.8 percent annual growth, SCM andprocurement applications outpaced most softwaremarkets to total 9.9 billion in 2014.Everything starts at planning theDemandWhy would you implement demand planning?Since everything has been going so well followingthe traditional systems? But, have they really? Hasn’tthere been occasion which made you doubt thetraditional system? Like the season when youstocked up on faded jeans and the crowd wentgaga over dark slim fit denims? From the suppliersto manufacturers and ultimately the retail stores,working in silos have never given them a completescenario of what the end customer expectationswould really be, leading to “out of stock products”or “over stocked” with items that are not in demandending in customer disappointment and revenueloss.A supply chain manager has to understand anddelve deep into the necessities of demand planning.Starting from the suppliers of raw materials,manufacturers for products, warehouse,wholesalers or distributors to the retail stores, thesystem rests upon his management. Working on thedemand workbench, deciding the demand driversfor a particular product at a particular time, findinginsights from historical and current demand all fallsunder his responsibility.Aspire Systems - Demand planning and Forecasting: Planning is gaining in SCMIn a make-to-stock environment, we cannot waituntil the demand starts flowing in to startproducing. The key to success lies in being ready.SuppliersProcurementDemand& SupplyPlanningSales &MarketingDistributorConsumerFlow of InformationFlow of GoodsManufacturingDistributionSource: ner.pdfPlan Demand for SCMThe goal of any supply chain is to deliver the best forits customers. No matter where they are, whichchannel they use and when they purchase.Seamless demand planning across platforms is theneed of the hour to keep customers loyal. Beingable to detect changes in demand on variouschannels and stocking up accordingly is the newchallenge. Take advantage of the changes andfluctuations in demand. Instead of being adverselyaffected by it, make sure it reaps benefits for you bysimply being ready.Companies need a more comprehensive forecastframework as they grow, forecasting and demandplanning become integral part of other processesculminating in an end-to-end process called demandmanagement. Demand planning is the base ofpromotional planning and pricing.Leveraging the best of breed technology strategycompanies can get new insights into businessprocesses like the customer relationshipmanagement and supplier relationshipmanagement which form the critical linkages in thesupply chain.Anticipation of customer demands is what drives thepush and pull in supply chains. Right tools andpartners would help you to get the best out of everyseason and change in demand. Supply chainmanagement partners nowadays are providingtailored solutions to get the best advantage ofdemand planning and forecasting according toindustry. Using the best in class technology,3
Demand planning and Forecasting:Planning is gaining in SCMbusinesses are able to lessen the gap betweenforecast accuracy percentage and inaccuracypercentage, compared to the other solutions in themarket by getting the competitive advantage.Ensure that the best possible estimate of customerdemand is at hand while reducing on costs likeinventory, distribution, over stock products.Retailers like Shopper’s Stop, Mass discounters haveapplied demand planning and forecasting tools todrive revenue and customer satisfaction.Challenges in Demand planningAccuracyAn anonymous quote sums it up rightly “forecastingis the art of saying what will happen and thenexplaining why it didn’t.” Even for best of breedproducts in the market the accuracy level would be80%. Forecasting can never be 100% accurate andthat is the truth. But the right tools can give youhigher chances of accuracy whereas others may failexpectations.TimingSales and demand are heavily time dependent. Salesfluctuation at different time of the year is one of thehardest challenges for good forecasting anddemand planning initiatives.ChannelsIn view of Omni channel demand planning, forecastneeds to cater to different demands of differentcustomer segments buying from various channels.Some products might be selling well online but notselling accordingly from brick and mortar. Planningdemand accordingly would help keep upinventories and plan promotions for variousproducts on different channels.Benefits1.Improved in-stock availability-All season readystock2.Better view of demand swings helps in buildingeffective marketing strategies.3.Cohesive, seamless relationship between alltiers of supply chain, leading to greater visibilityof processes.4.Better revenue.5.Lesser wastage of stock.6.Lesser out of stock scenario.7.Preplanned flexibility to adapt to regular marketchanges.8.Better assortment and allocation across allstores and channels.9.Improved productivity of planners across alltiers of supply chain.StrategyFaster or better? Depends on your strategy, at thesame time it would be the strategy which will decidethe fate of your demand planning. Rather thangoing for fast but not accurate enough, better tostick to slow but steady.ImplementationWhat makes demand planning tough is that there isno one size fits all scenario, every industry, everycompany, every product has a different demand,that too changeable with time and market.Right toolsThough there are endless numbers of vendorsoffering same services, yet finding the right tool thatsuits your basic needs as a supply chain can be tough.For example, the demand planning and forecastingtool for a chocolate supply chain would differ greatlyfrom that of an ice cream supply chain. For these twosupply chains, not only the raw materials but seasonalmarket fluctuations vary a lot differently.Aspire Systems - Demand planning and Forecasting: Planning is gaining in SCMFundamentals of Demand PlanningTimeTime is of essence when it comes to planningdemand. Along with changing seasonal demands,weather, media activity, social and religious factorsalso contribute to market fluctuations. What isaffecting the market at that time is a keydetermining factor of demand planning.4
Demand planning and Forecasting:Planning is gaining in SCMPast demandHas the locality been buying same sorts of stuffevery winter? Has the demand for a particular colarisen consistently? Has the sales gone down for asoap? Based on historical data your future demandshould be planned. It helps in deciding whether ornot to stock up on a particular product, buy more orless of some products thus cutting down oninventory waste.Competitor activityYour competitors' marketing activity will have aneffect on your demand planning. Have they deviseda seasonal offer? Have they optimized pricing for aproduct? These are surely going to influence yourdemand planning.Effective demand planning and forecasting is thekey to driving business growth and customersatisfaction. Your demand planning reflects howclosely you know your customers and theirexpectations. Demand planning and forecastingtools that can be easily integrated into existing SCMand provide dependable feedback have become anecessity to cohesive, successful SCM environment.Finding and adding the right demand planning andforecasting tool can form the next big step for yourcollaborative business strategy. Forecasting anddemand planning is a practice which not onlystrengthens the bond between various segments ofthe supply chain but also between the supply chainand the end customer.Marketing effortsYour own marketing efforts and how they areperforming. If your marketing strategy for aparticular product has been doing well, then it isexpected that the demand for that product wouldbe higher than others.PricingBuy one get one free, buy at 50% off and other suchprice optimizing offers are major demand drivers.Keep these in mind while planning demand.Gartner’s list of top 10 supply chainmanagement solution -quadrantsupply-chain-planningAspire Systems - Demand planning and Forecasting: Planning is gaining in SCM5
Demand planning and Forecasting:Planning is gaining in ticle/a practitioners guide to demand y-chain-planning?ABOUTASPIREAspire Systems is a global technology service firm serving as a trusted technology partner for its customers. Thecompany works with some of the world’s most innovative enterprises and independent software vendors, helpingthem leverage technology and outsourcing in Aspire’s specific areas of expertise. Aspire System’s services includeProduct Engineering, Enterprise Solutions, Independent Testing Services, Oracle Application Services and ITinfrastructure & Application Support Services. The company currently has over 1,600 employees and over 100customers globally. The company has a growing presence in the US, UK, Middle East, Europe and Singapore. For theseventh time in a row, Aspire has been selected as one of India’s “Best Companies to Work For” by the the Great Placeto Work Institute, in partnership with The Economic Times.SINGAPORENORTH AMERICAEUROPEINDIAMIDDLE EAST 65 3163 3050 1 630 368 0970 44 203 170 6115 91 44 6740 4000 971 50 658 8831Aspire Systems - Demand planning and Forecasting: Planning is gaining in SCM6
Aspire Systems - Demand planning and Forecasting: Planning is gaining in SCM 4 Timing Sales and demand are heavily time dependent. Sales fluctuation at different time of the year is one of the hardest challenges for good forecasting and demand planning initiatives. Channels In view of Omni channel demand planning, forecast
