Demand Sensing and Execution; Business Game Changer
4 October 2017
By Debbie Bowen-Heaton, Partner at Oliver Wight EAME
In today’s market, organisations must fight harder, faster and smarter than ever before. The modern world is consistently inconsistent, characterised by consumer transience, faster-moving trends and increasingly volatile markets. Excellent service is still demanded by customers but brand loyalty, if it exists at all, is driven by convenience (even more so than price).
If you’re looking to make the jump from being ‘good’ to being amongst the ‘best’, businesses, then Demand Sensing & Execution is the game-changer. Within such an unpredictable consumer environment, effective long-term demand planning and management is essential, and efficient demand sensing and execution processes take the chaos out of short-term planning. They’re levers which ignite actions to real-time signals or responses of customers and with lightning-fast reactions, companies improve customer service and increase sales revenue.
The key is in managing, assimilating and interpreting the volume and frequency of inbound data, and turning it to the advantage of the organisation, whilst balancing cost, cash and service.
WHAT IS DEMAND SENSING?
Demand Sensing is a path heading directly towards executional excellence, guided by the short-term sensing signals. In actuality, it provides real-time consumer insights to enable organisations to immediately detect and respond to changes in demand within the three-month Demand Execution window.
By leveraging analytics and the latest mathematical algorithms, it creates an accurate picture of changing demand, based on the current realities of customer behaviour. And, the accuracy of near-future forecasts also improves as they’re adjusted in alignment with the latest up-to-date information for a better customer experience.
Demand Sensing depends on a broad range of demand signals from multiple sources – eliminating the risk of behavioural bias – to create one set of numbers. Consequently, collaboration throughout the supply chain is key. In line with effective advanced Demand Execution in more mature organisations it requires collaboration to improve supply chain agility and create mutually beneficial outcomes across the board.
Both sales and marketing are integral to the process. They have unique insight into real-time information on customer and consumer buying habits, and will know about upcoming promotions, network changes or forthcoming buying trends etc. As they are consumer-orientated, they are the bridge between customers and supply chain, communicating vital information to facilitate consumer demand. For this to function correctly, an effective supply chain response needs to be in place, propelled by a collaborative supply chain which can react to consumer demand successfully.
Sales and marketing may have ownership of the demand plan, but demand control and supply chain need to be fully integrated to deliver on the sales and marketing activity.
It’s about having a formal structure in place, monitoring local actual demand by item to facilitate proactivity, rather than reactivity, with triggers that flag up abnormal orders. External factors can mean that sometimes things deviate significantly from what is expected, and early detection is imperative. Anything from freak weather conditions – if the weather is going to stay hot, there will be more beer consumption, for example – to a social media popularity explosion or an unexpected order. If a customer orders 1,000 pallets when they were expected to order 100, the short-term plan needs to be changed to reflect this demand.
Knowing about anomalies straightaway is much more useful than having a meeting at the end of the month to review what happened, post-crisis. Crucially, there must be a process that ensures the consequences of accepting the changed situation are understood and are properly synchronised back through the supply chain.
ARE YOU READY FOR DEMAND SENSING?
If Demand Execution is the engine, then consider Demand Sensing the fine-tuning. As enticing as Demand Sensing is, it’s a tool which only can only truly benefit businesses which are mature enough utilise it. It’s an advanced business capability and organisations need to master the basics of Demand Execution before even considering the enhanced methodologies of Demand Sensing.
A properly integrated and fully functioning Integrated Business Planning (IBP) process is also a must and significantly, the right players need to be in the game, which means the Demand Plan must be owned by the sales and marketing teams, not supply chain. Demand Sensing needs to operate in tandem with multiple other processes – Demand Control, Execution, and Supply Chain. Organisations need to already have all the data, visibility and systems in place to be able to look at forward plans from the bigger picture perspective.