With consumers’
behaviors becoming more unpredictable, retailers are supposed to stock the
right inventory. Inventory imbalance is usually because by inaccurate product
forecast that either lead to overstocks or stock-outs, finally displeasing the
customers. To salvage all these challenges businesses need to be accurate with
their forecasting and this is where consensus demand planning plays a crucial
role in improving the accuracy of the forecast and reducing inventory through
better collaboration and communication. In retailers' business models demand
planning is becoming a necessity that has become a significant part of their
daily activities that help them gain a competitive edge by understanding and
predicting customer wants and needs.
What
is Consensus Demand Planning?
Consensus demand
planning is the process of collecting multiple inputs into the forecast from
different departments like sales, marketing, production, and management working
within the company. All the inputs or suggestions shared by all the departments
are examined by the demand planners who after carefully evaluating them make
the final decision on the forecast numbers.
In other words, consensus demand planning allows retailers to accurately
forecast future demand and provide the forecast to merchandise planners based
on which they can optimize inventories. As a result of this planning, the right
product is deployed at the right place at the right time and for the right customers.
Consensus
Demand Planning Process
Demand planners create
long-rage estimates of expected demand based on historical sales data and
statistical analysis. The long-range estimate is also called Baseline Forecast
and once it is generated, demand planners start taking inputs from different
functions for studying the impact of marketing promotions, the launch of new
products, discounts, and product discontinuations. After this, a consensus
meeting is held with sales, marketing, finance, manufacturing, purchase, and
logistics for releasing the consensus demand plan for operational purposes.
This structured consensus demand planning process aligns diverse functions and
imbibes a sense of responsibility for all the deliverables.
What are the Challenges
of Creating Consensus Demand Planning?
With a wide variety of
products available, it becomes tough to forecast a product that customers will
prefer to buy. In such circumstances, retailers need an apt solution to manage
their supply chain operations and merchandising through better prediction and
accordingly shaping consumer demand. By accurately predicting consumer future
demand, businesses are able to maximize sales and marketing effectiveness and
make use of the information to align their demand with the supply. Retailers
seem to struggle to discover a consistent way to communicate with their
suppliers and business units, as they require a collaborative platform to share
crucial data with their business counterparts. Besides, several other challenges
are faced by the retailers during the consensus demand planning implementation.
- In consensus demand planning an
individual has control over the forecast and it is challenging to align on a
single forecast that is approved by everyone in the company.
- Merchandise demand planners find
challenges in balancing art with the science of demand planning, as making use
of historical data to produce a forecast is a science, and planners’ ability to
inform the forecast is an art that they need to clearly articulate.
- Forecasters find it tough to incorporate
emotional decisions into the forecast.
- Data cleanup activities on POS data that
validate historical data are challenging.
- Making weekly decisions regarding a
meeting and supporting demand plan by replenishment analysts is extremely
difficult, as they need to evaluate the quantity of every product that should
be allocated across stores.
What are the Benefits
of Consensus Demand Planning?
Consensus demand
planning serves businesses with a myriad of benefits, from better forecast
accuracy to the stock of the right product, businesses greatly benefit from it.
With a much-defined forecast, businesses can easily and affordably cater to
unexpected demand and lunch new products. This also facilitates them with
improved customer satisfaction and higher profitability. The accuracy of the
forecast also helps retailers to optimize production and distribution plans to
cut down on surplus inventory and safety stock. Some of the major benefits of
consensus demand planning include:
- It ensures better forecast accuracy
- Low inventory transportation cost
- Better product margins
- Entire businesses have utmost demand visibility
- Functional teams have better collaboration with each other
- Timely delivery and quick order fill rates
- Historical data cleansing and accounting for future promotions is flexibly managed
- Inventory is reduced throughout the business
- Product configuration management is improved
- Additional and obsolete inventory write-off is reduced
- Sound and repeatable knowledge base
- Increased customer satisfaction
How
3SC will Help Businesses in Consensus Demand Planning?
3SC holds great
competencies in transforming major areas of businesses like supply chain,
merchandising, store operations, and customer relationship management. With our
extensive experience, we work in close association with our clients to come out
with revolutionary strategies for every area of the supply chain.
- We not only have a sound understanding
of the optimal inventory level for each product and the steps required to be
taken to achieve that level but also devise an innovative methodology to
identify major inventory drivers.
- 3SC is a leading supply chain service
provider that along with its expertise and experience turns recommendations
into benefits for business.
- Provide clients with high-quality and
cost-effective supply chain solutions
- Due to its vast experience in supply
chain solutions, 3SC has led retailers to major transformation and with its
structured approach, it develops a comprehensive plan to take clients’ business
to the next level.