The Democracy Movement in Demand Management

Abstract

Forecasting is an essential part of demand management, but firms often see forecasting as an unchanging, standalone activity. Truly, it’s an advancing piece of the demand management puzzle, complete with technology, collaboration, and innovation.

Article

It’s not Forcasting—it’s Demand Management

The adage about the forecast always being wrong is still in the hearts and minds of most business people.
Yet the enterprise continues to dedicate lots of time trying to get it right. Why? Because the stakes are truly high—every percent improvement in accuracy has huge impacts on the sales and operating expense performance for you and the whole supply chain. That is why we recently conducted research on Demand Management Technology (and business and process innovations in the industry).

But why is the forecast so wrong?

“Sometimes traditional algorithms, like seasonality (Holt Winters), violate common sense,” Robert Byrne of Terra Technology told us. Not only do many products buck seasonality trends, but the weather just isn’t what it used to be. That’s where innovative companies like Planalytics come in. Additionally, smoothing algorithms and data aggregations defuse the accuracy of the data. I like to remind people that Fourier was writing his algorithms around 1820. I think a few things have changed since then!

New algorithms, new sensing and visibility technology allow us to identify our demand patterns—uniquely, as well as to see true demand as it is happening. New approaches that look at the real impact of weather (not seasonality buckets), understanding promotional impacts, understand the characteristics of products as they go through their life cycle and real-time demand events that look at real demand, etc.—all this can be had by everyone today (like the team in Figure 1).

Figure 1

It’s the Process, too!

Part of the problem, though, is that firms look at forecasting as an isolated activity rather than as part of an overall set of demand management practices. And as the boundaries of business and technology expand, so do the process innovations, creating a rich set of demand management practices across the whole supply chain, the whole life of the product, and across the time zones of integrated business events that drive us to the outcomes that we seek: customer loyalty and profitability. Sounds good; where do I start?

Demand Management as an art and science is a growing category with many new opportunities and innovations to offer to businesses who are seeking improved business performance. And who isn’t?

Collaboration is Key

This simple schematic (figure 2) drives home the point that, not only a lot of variability occurs in the supply chain, but sometimes good variability—like more sales than you planned. Also information variability—not just the business events, but important data being held by trading partners.

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Figure 2

Today’s technology allows ways to share appropriate data—mostly in real-time—across the web, to make sure that you are working on the most accurate timely data possible from the right sources, at the right time.

New Invocations in Technology

We recently conducted new research on Demand Management technology.

What was clear from the research was the process driven categories where technology can provide a powerful role. For example, understanding that the market’s long-term demand and demographics is quite different than managing near-term demand with established products, vs. a tired product line that is nearing the end of its life. Many vendors in the demand management arena have specialized in certain areas (many firms provide broad based suites, as well), which have proved very useful overtime to the enterprises that use these approaches.

Figure 3

Web-based technology, in many flavors—collaboration, like Sockeye; on-demand, like Digital Tempus; risk management, like Vivecon; and RFID data feeding the demand process, like TrueDemand; etc., are now allowing firms to gain more capabilities for their processes, layering these solutions on top—or in between—the solutions installed today in your existing portfolio, like i2 and Manugistics, to name a few.

As the process gets democratized—sharing data, opinions, trading partners, etc.—new ideas keep entering the market—and new players, who are unlocking the keys to innovative ways to solve your business problems. These solutions can complement your portfolio, so you don’t have to wait to petition the old establishment to get the capabilities you need.

And pricing for technology, On Demand, both software and data services, which adheres to a pay-as-you-go approach vs. a big license deal, can make Demand Management available to everybody.

This article cannot even scratch the surface. But if you want to know more, read the report.:
Demand Management Technology Evaluation
.


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