23 Aug 2022

Comprehensive Overview of Consensus Demand Planning

Retailers make use of consensus demand planning to precisely forecast future demand of the product so that accordingly the inventories can be optimized.

Comprehensive Overview of Consensus Demand Planning

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.

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