Demand Planning is a damnation. Why? As per our original damnation post,
- traditional demand planning models require historical data
- traditional demand planning models require market predictability
- traditional demand planning models require market foresight
- traditional demand planning requires knowledge of the expected price point
And how often in today’s constantly changing consumer marketplace, with new product releases coming faster and faster (to the point where your phone, laptop, and music device is out-of-date by a whole new release within a year), do you have good historical data, market predictability, and foresight? And how often can you be confident in the price-point, as a skunk-works product release by a competitor between sourcing and sale can force a price reduction to prevent inventory sitting on the shelves indefinitely.
So what can you do? (Besides burying your head in the sand like an ostrich?)
1. Get as much market data as you can.
Collect as much data as you can on your competitors imports, sales, and revenue using publicly accessible import data, analyst data, and company annual reports. It won’t be accurate, but with enough data you can often identify better trends than you could on the most similar product in your own inventory (which might not be similar, or recent, enough to be sufficiently relevant).
2. Have third parties conduct surveys on your behalf.
Sometimes the best way to gauge a market forecast is to actually conduct customer surveys and have a third party use the data to estimate demand for you. If you have no clue, the best thing you can do is admit it and get an expert to help you come up with a realistic demand forecast range.
3. Don’t focus a number, focus on a range and a potential rate of ramp-up or ramp-down.
If you know the demand is expected to be in the 100K to 200K units a month range, and the demand could double overnight, then you know that you need to contract for the low-end, but with a supplier that could ramp up to double production in a matter of weeks if necessary. And you have to negotiate a contract that allows orders to escalate, with pre-defined increases if the supplier is forced to work overtime (so you don’t get any billing surprises or animosity down the road).
4. Keep on top of sales data in real-time.
Be sure to get at least weekly PoS updates, and re-run the projections on a regular basis to detect an upswing or downswing early, so that you don’t get caught with your pants down, or, even worse, your pants off.
If you follow these tips, then you can get a reasonable grip on demand planning while your competitors flounder with the flounders.