A Quick Guide to Demand Volatility for Supply Chain Management

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Demand planning isn’t easy. It’s frustrating and it takes time. That said, if you’ve used & forecasting software in the past, then you know it doesn’t have to be so. For the process to be effective, businesses should first address their process inefficiencies and errors, identify opportunities for continuous improvement, drive discipline within teams, and invest carefully in a full digital transformation that can handle high demand volatility.

Let’s explore how to get past the plateaus with digital transformation.

Demand planning hurdles

The path to forecast- and optimization-driven demand planning takes time. You might identify and invest in supply chain software, but without preset business goals, the right vendor, and the right implementation, you may not get the returns you expected in forecast accuracy, inventory turns, and time and cost reduction.

Deciphering volatility

One of the problems with non-integrated supply chain management (SCM) systems and processes is that they’re not equipped to sense demand or smooth volatility. In fact, they amplify inaccuracy from the point of sale (POS) up through the supply chain. Nor are they equipped to help downstream actors manage vendor or supplier variability.

Integrated systems equipped with powerful forecast and optimization engines can aggregate or drill down into demand by product, channel, and geography. They can put upstream suppliers in touch with near-real time POS demand. They can model and simulate numerous demand drivers to optimally shape demand in many cases. These are just a few of the benefits of digital transformation, advanced analytics, and artificial intelligence.

Fixing bad practices

The most deadly sins include non-quantitative forecast methods and the failure to tap in-house knowledge about new deals, new competitors, or new exits. Organizations must incorporate knowledge from sales, marketing, and finance to better inform the supply chain and to build a consensus of the marketplace, upstream and down. Beware: department bias and error can complicate consensus planning.

Implementing demand planning software

There’s a demand shift towards digital business units for supply chain organizations. Organizations are increasing their technology spending for digital transformation. While most employ some form of enterprise resource planning (ERP), these transaction-focused data systems may not be enough. Outline your demand drivers, channels, seasonality, and so on. Independent software vendors, management and technology consultants, and systems integrators can help you find what you need.

Real-time supply chain management

It’s not enough to react feverishly to changes such as unexpected orders or cancelled contracts. Real-time supply chain management enables a fluid response to market change:

  • Increase forecast accuracy, inventory turns
  • Improve sales and operations planning
  • Optimize timing and allocations for campaigns, promotions, capital investments, and more
  • Collaborate vertically
  • Enable Multi-Echelon Inventory Management to optimize stocking locations, buffers, and more

Making the digital transformation

Step one is to sort and simplify your data, reduce the number of SKUs if possible, and eliminate redundancies. The next step is to integrate your ERP system enterprise-grade supply chain technology. Look for artificially intelligent cloud-based applications for maximum access, collaboration and analytic power.

Demand planning takes time. Fix the errors, put the right processes in place, and then upgrade your software to improve your programs. There’s an additional step; hire strong talent in operations planning, sales, and analytics. Recognize that with the digital shift in business, the most successful businesses will be those that adapt.