DEMAND SENSING IS THE FUTURE OF SHORT-TERM FORECASTING

Every day companies are confronted with a universal and recurring pain point: poor forecasting. Demand forecasts are a crucial part of the planning process, and decisions based on them have repercussions all throughout your supply chain. By using demand sensing, poor forecasts can be turned into history.

For planners, the forecast is the foundation on which they make decisions, and these decisions affect the entire supply chain, including service levels, inventory and logistics costs.

Traditionally, demand plans are created using statistical forecasting models which are based on sales history data from the previous year. These plans are very accurate on a long- to mid-term horizon, but they are simply not good enough for fast-moving consumer goods (FMCG) industries.

Three key benefits of demand sensing

Working with demand sensing, we can highlight three key benefits that generate a high impact.

• Better service level: With demand sensing, you can close the gap between monthly demand plans and rapidly changing daily requirements, i.e. the gap between planning and execution. You can now have the right mix of products available at the right time, which directly improves your service level, while at the same time reducing stockouts and waste.
• Lower inventory: With a more accurate forecast, you can lower your inventory. As there is no more need for high safety stocks, you can reduce your net working capital.
• Better time efficiency for planners: Your planners are now free from the tedious task of supervising and manually adjusting the demand plan on the short term, and they can focus their efforts on more value-adding tasks.

Read more about how demand sensing allows for more accurate and detailed short-term forecasts and the importance of short-term forecasts in the FMCG industries here.