How to Protect Margins with Demand Sensing Technology

Solve for demand planning confidence, despite economic uncertainty. 

Lurking beneath the relentless wave of supply chain disruptions are challenges managing supply and demand, as peaks and valleys in orders mean a longer shelf life for warehouse inventory. It’s a tug-of-war that can cause inventory carrying costs to soar.   

Now, higher interest rates and material prices threaten to increase inventory carrying costs, adding to the pressure on both supply chain and finance leaders to protect margins. And as markets shift, companies must find new ways to quickly reduce costs everywhere they can, and ultimately do more with less. 

Accurate, long-term forecasting is crucial to efficient supply chain management and driving down costs. But supply chain professionals today require the means to understand short-term demand to help make faster decisions based on what happened days – or even hours – ago. And this can’t be done manually with high volumes of SKUs and vendors in the mix, combined with the complexities of global trade. 

Demand sensing – a methodology using artificial intelligence (AI), monitors real time data such as customer orders, consumer sales, inventory in the channel and even social sentiment signals or weather signals to dramatically improve near-future forecasts, providing a much better demand signal for operational planning. The result is the ability to shape/shift demand by leveraging price / promotions,  deploying the right inventory to meet higher customer services levels and much lower firefighting activities such as unplanned changeovers, inventory and labor expedites and reduced spot rate transportation bookings

Going Beyond the Traditional Paradigm for Demand Forecasting 

Traditional demand forecasting relies on historical sales data that is often insufficient for organizations to able to respond to changing customer needs or evolving consumer buying behavior. Demand sensing takes the demand plan as an input and reconciles it to the changing reality – e.g., higher or lower orders, promotions that may or may not be running as planned, evolving inventory buffers on retailer warehouses or shelves, to create visibility to the changing requirements that the business can respond effectively.  

How Artificial Intelligence Helps Navigate Supply Chain Disruption and Gives You a Competitive Edge 

Demand Sensing technology is AI driven and highly automated; it runs behind the scenes ensuring that business can deal with the evolving reality and respond effectively. For example, during covid, when many consumers started panic buying toilet paper, companies leveraging demand sensing were able to monitor how inventory on the shelves was depleting much faster than normal. Those same companies were able to increase production and deploy inventory faster and create a long term competitive advantage by ensuring their product was on shelves while their competitors’ products were not.

Example: a European chocolate manufacturer who could effectively monitor which flavors were most in demand during Easter and used those learnings to capture a large business opportunity by launching new variants that would be the most successful during the following Easter season.

Dealing with supply and demand fluctuations is challenging. Stockpiling inventory is costly, and the pandemic, wars, political tensions, and inflation have rendered historical data ineffective (along with your spreadsheets). World-class organizations are applying supply chain demand sensing AI, and here are three reasons why. 

Ensure you have a clear view of market trends and potential risks

Organizations today must have a clear view of the most current trends so they can adjust forecasting and product development to match. They need early warnings of potential product or service issues. In short, demand sensing helps you adjust quickly to unpredictable market needs with optimized inventory.

Understand your current buyer behavior to rapidly respond to demand spikes or dips

Your customers have more choices than ever when it comes to what they buy and whom they buy it from. Along with the product they want, they expect personalized and responsive service. By leveraging near real-time data, your business will be better able to meet and shape your customers’ needs. Demand sensing technology provides the means to truly analyze current demand signals, reduce signal latency across the supply chain and improve response times. 

Establish better supply chain visibility so you can improve service and product offerings for competitive advantage. What kind of visibility will add value to your business? You need to  be able to see across events and promotions. You need the ability to evaluate external factors such as weather patterns, geopolitics, inflation – even social media sentiment – to improve forecast accuracy. You need to gain insight into competitive positioning and improve service and product offerings. And you need a single platform to service these needs. 

Improve Forecast Accuracy with a Broader Range of Demand Signals 

Begin with granular, historical data: Analyze sell-in demand data but use a shorter time horizon and factor in shipping history.  

Then incorporate every other piece of data : This includes consolidated POS information, and other channel data, such as warehouse withdrawals, on hand warehouse/store inventory, and external drivers like weather and social sentiment. This can work as an early warning system for future disruptions as well as predicting trends.  

Incorporating data that reflects the current realities of your supply chain, including a broader range of demand signals, improves your speed, robustness, and agility in responding to supply chain disruptions. 

The Logility® Digital Supply Chain Platform Offers Demand Sensing Technology 

Demand sensing technology uses artificial intelligence to take market-based demand data and translates it into information you can use to improve short-term forecast accuracy by 30% or more compared to traditional methods of time-series forecasting. This means faster demand response times, elevated customer service levels, balanced inventory, and improved profitability. 

With Logility’s digital supply chain platform, you have the technology you need to craft a modern, data-driven, and managed supply chain network with all the benefits it brings. 

From integrated business planning to demand and supply planning and optimization to vendor management and the advanced analytics you need, we’ll deliver a digital, sustainable supply chain that powers the resilient enterprise. Hone your competitive edge and overcome any disruption. Your supply chain won’t fix itself, and Demand Sensing provides you with a proven way to deliver tangible value. There’s no time to waste. Let’s get started.