FMCG Inspiration Event: How to make sense of demand sensing?!
Rising market volatility and evolving consumer behavior are a fact of life for all of us. From a survey conducted by EyeOn, it has become clear that a lot of companies are investigating how to deal with these new developments. Some just continue improving their running S&OP and forecasting processes while others are looking for a step change. Should we use other sources than baseline statistics and the input of commercial counterparts?
But which signals really can be used in forecasting and planning? How important is it to “sense and respond” to changes in near real-time? After the survey in spring 2016, EyeOn hosted an inspiration event on the subject of Demand Sensing. In this event it became clear that the answer to the questions above is very much depending on volatility in demand and supply:
- Some multinational companies are doing pilots with Demand Sensing or have already invested in tooling on top of their ERP or APS. The first step in many cases is to use more actual order info within their own company to convert transactional order information in signals that can be used to improve their inventory control, planning or scheduling.
- A growing number of manufactures has the availability of (e)POS data of their downstream retailers. Some only use (e)POS data for marketing analyses, but depending on the availability (largely varying per country /retailer group) it is more and more used in (demand) planning.
- Only looking at aggregate POS data from the marketing department is not good enough anymore. The need for detailed and frequent POS data depends on volatility (e.g. promotion pressure, new products or weather conditions). Companies with high volatility increase the frequency they look at POS. The importance very much depends on the business added value. Next steps are depending on tooling and the capability to transform data into information. More work for data scientists & applied modelers is coming up….
- Social media activities are gaining importance. Just like many companies invested in trade promotion processes and tools in the last years, now is the time to invest in sensing the social media. The impact of these campaigns strongly depends on product and category, but at those companies where it is used, the first steps are made to integrate processes and set up tooling. The promise is clear: marketing & supply chain can help each other with insights to bridge the gap and decide on better insights!
- The impact of weather on consumer behavior is an effect that is mentioned a lot.. Three different influences were identified:
1. Buying times or occurrences: Consumers stay home in case of extreme weather
2. The mood of consumers: Bad weather leads to unhappy consumers
3. Product (group) specific sales patterns such as BBQ and Ice-cream.
“To BBQ or not to BBQ” is driving a bigger part of the supermarkets portfolio then you would expect. Not only meat, charcoal and salads are effected but also tissues, chocolate and sauces etc. Many retailers act up on this in a relatively “simple” way. Either everything is normal or there is a BBQ alarm. This 0/1 thinking is not optimal in many environments.
Thinking in thresholds, alerts and scenarios opens up a world of improvement potential which is still hidden for many companies.
During the interactive day a lot of valuable content was shared. Leo Kivits discussed retail trends, EyeOn shared the Demand sensing research and the participants played an interactive sensing game, learning how signals could be used in optimizing value chain performance. In the afternoon MindHacker Marc Woods showed us how the human brain can be “sensed”.An inspiration street gave everybody the opportunity to learn and discuss hot topics like Omni-channel, weather forecasting, getting value out of POS and tooling for demand sensing.
Conclusion after an interactive and valuable day is that demand sensing is still developing but gives the opportunity to leverage existing planning and forecasting processes. The added value of the different signals will vary very much on market and customer volatility and the ability to use it in your chain. Gaming proved to be a very powerful way to investigate how to do this and to get ready for the next step!
When you want to know more don’t hesitated to contact André Vriens Andre.firstname.lastname@example.org.
The EyeOn FMCG team