Demand Sensing for F&B Supply Chain

Demand Sensing (and Other Secret Ingredients) for Food and Beverage Supply Chain Success

Food and beverage companies can use demand sensing to predict sudden market trends and prepare for actual supply needs.

Demand fluctuations dominate the food and beverage (F&B) industry. How companies in this industry approach demand forecasting can have far-reaching effects on their short-, mid- and long-term success. For example, an F&B business that supplies perishable goods knows that these goods have a limited shelf life and therefore must accurately project how much to purchase at once. If the business purchases too much, it risks overstocking goods that cannot be sold after they exceed their shelf life. In this instance, time, money and resources are wasted trying to sell perishable goods that do not align with consumer demand.   

And let’s not forget the risk of stock shortages or out-of-stock situations, an all-too-familiar challenge in recent times. An F&B company that cannot provide consumers with the food and beverages they demand within an expected time frame misses out on opportunities to grow revenue and brand integrity, and may lose customers to competitors better equipped to fulfill that demand.  

The bottom line: F&B companies need accurate ways to track and forecast real-world demand and keep pace with consumers’ expectations. To accurately predict short-term demand, a demand sensing solution can be an asset in their forecasting toolkit. 

What is Demand Sensing and Why Is It Important for F&B? 

Demand sensing is the translation of market-based demand information to detect short-term buying patterns – who’s buying what, which attributes are driving sales and what impact demand-shaping programs are having.  It leverages artificial intelligence (AI) and near real-time data inputs to offer granular-level forecasts, and uses advanced analytics and machine learning to recognize complex patterns and provide insights into demand that might normally go unnoticed.  

Demand sensing contracts the time between real-world events, the emergence of a statistically meaningful mix of demand signals, and your response to them. Demand signals can originate from internal and external sources such as point of sale (POS), demand signal repositories (DSRs), competitive data, or syndicated data sources like weather patterns to identify demand trends. Short-term forecast accuracy can improve by up to 40% or more with demand sensing compared to traditional time-series forecasting. 

Using near-term data to predict short-term demand enables F&B businesses to optimize many facets of the supply chain: ensuring stock is available in the right location at the right time or allocating existing stock to fulfil local demand; more precisely predicting expiry on inventory in-transit and in the warehouse; and assessing and leveraging production capacity to quickly address demand fluctuations. 

Three More Supply Chain Forecasting Solutions to Consider for Food and Beverage 

 Demand sensing can be a significant differentiator for food and beverage businesses. However, other solutions in a digital supply chain platform like those offered by Logility can realize additional value: 

 1. Advanced inventory management 

 An F&B company can use advanced inventory management to automatically establish appropriate inventory control parameters for each SKU/location combination. These parameters can be uploaded to the company’s manufacturing, purchasing, and distribution solutions to make sure the right products are consistently delivered to the right distribution locations.  

 2. Supply chain data management 

 Standard enterprise resource planning (ERP) solutions are insufficient for F&B companies that prioritize in-depth supply chain planning and optimization. These solutions can even make it difficult to connect disparate data systems across a company. By contrast, F&B business can use a supply chain data management solution to alleviate these issues. Supply chain data management empowers a business to store, manage, and secure data for supply chain planning, execution, and procurement operations. It also ensures that this information is accessible to end users across the business.  

 3. Time-phased replenishment planning 

 With a time-phased replenishment planning solution, an F&B company can use outputs from demand and inventory planning to forecast demand. The solution lets the business view its inventory, service levels, current orders, and other relevant data. This provides insights into product and material requirements, so a business can find ways to simultaneously minimize costs and maximize customer service levels.  

Reap the Benefits of Advanced Forecasting Capabilities 

 The food and beverage industry must place a higher priority on forward-looking data to sense, react and adapt to what is happening in the marketplace. Forward-thinking leaders will benefit post-COVID from an enhanced market-based demand planning capability like demand sensing. 

Learn more about this game-changing technology here

Steve Ungar

Written by

Steve Ungar

Vice President, Product Innovation

Short bio

Steve Ungar is a vice president with Logility’s Product Innovation group, bringing over 30 years’ experience defining and creating software that delivers value to customers. Since joining Logility in 2013, Steve has held senior level positions in product management and professional services, ensuring the software developed and deployed addresses customers’ most pressing supply chain business needs. Supply Chain Brief