Julie Fraser: Addressing specific demand challenges

The path to becoming demand-driven starts with getting a firm grasp on demand. Without this foundation, all of the work to align other aspects of the operation around demand is ineffective. Beyond statistical forecasting, demand planning must be collaborative and analytical to ensure the realities of supply, demand, production, logistics, financial forecasts, and internal and external activiti...
By Julie Fraser March 1, 2008

The path to becoming demand-driven starts with getting a firm grasp on demand. Without this foundation, all of the work to align other aspects of the operation around demand is ineffective.

Beyond statistical forecasting, demand planning must be collaborative and analytical to ensure the realities of supply, demand, production, logistics, financial forecasts, and internal and external activities all contribute to shaping the plan. Most companies also need granularity to see likely demand for each product in each configuration, channel, and location.

Beyond those, demand-planning challenges vary by business. Some companies will face more than one of these challenges, and most of the providers do address more than one of them as well. We’ve simply listed them in one or two areas where they are particularly strong.

Daily volatility : Consumer goods and some other manufacturers face high variability in demand for each product in each location every day. Many companies can create an accurate demand picture if they forecast more frequently. Several vendors offer daily demand forecasting, including SAF, Terra Technology, and TrueDemand. Another aspect of this variation can be weather, and Planalytics serves there.

Promotions : Special sales offers create shifts in demand patterns, so promotional planning often goes hand-in-hand with demand planning. Providers of software to manage the promotions and demand-planning process include DemandTec, DemandWorks, John Galt, Junction Solutions, Kineticsware, Oracle, Prescient, and Smart Software.

Life-cycle speed : High-tech and fashion companies must cope with the short life cycles of their products, and that of their suppliers. Accurate demand planning for new and end-of-life products is a key to avoiding inventory liability and developing sound contracts. Some of the providers of demand planning for high-tech industries include A3, Adexa, i2 Technologies, JDA, Kinaxis, RockySoft, and Steelwedge.

Commodities : Commodity manufacturers have special challenges in that they often cannot vary their production output very easily, but prices for their products will shift significantly based on total market supply. These products often are purchased in bulk to hedge against those price shifts, so pricing management may play a role. AspenTech, i2, JDA, SAP, Supply Chain Consultants, and WAM Systems offer solutions.

Infrequent sales : Industrial equipment companies have intermittent demand for their products. A straight history-based forecast will not provide a good view of the likely demand for those products, which is critical for ordering long lead-time parts. John Galt, MaxQ Technologies, Silvon, and Smart Software have solutions specifically for that problem.

Seasonality : Many products sell most at certain times of year. Problem is, many solutions have had algorithms for a long time, but not everyone uses them effectively. Providers active in demand planning include Alt-C, Demand Management, DynaSys, Forecast Pro, JDA, John Galt, Logility, Manhattan, McConnell Chase, Oracle, and Sterling. Some ERP vendors also can account for seasonality.

In building a demand-driven business, companies clearly must have a detailed view of likely demand. What logic is required in the software will vary based on the nature of the demand patterns. While demand planning goes well beyond simple forecasting, the algorithms to handle particular challenges are still important to success.

Author Information
Julie Fraser is Principal of Industry Directions Inc., and has been an industry analyst, consultant, and marketer for more than 20 years, specializing in manufacturing value network processes and systems. Julie can be reached through Manufacturing Business Technology or e-mail at jfraser@industrydirections.com