Q&A with Trevor Miles, director of industry and applications marketing, Kinaxis.
Are the lackluster sales figures from this year's back-to-school shopping an indication of what to expect for the holiday season?
Who knows.and that's precisely the problem! The assumption that past results are a reliable predictor of the future is being proven wrong every day. Constant volatility is challenging companies as they try to answer the question of what level of demand they should prepare for. It's a critical question because there are risks on both sides if you get it wrong excess inventory or missed sales opportunities both detrimental to performance. You can't help but sympathize with the S&OP managers trying to make heads or tails of the demand signals they are seeing. At times like these where there is little to no predictability, experts are now saying that the ability to respond and react to demand is more critical than the ability to forecast/plan for it.
So if you don't forecast demand, what do you do?
The forecast is still important, but the approach to forecasting is changing.
It is now quite clear that historical demand is, at best, just one possible indicator of future demand. As such, "statistical forecasts" should be seen as just one input to the demand planning process. In addition to generating a forecast from historical data, companies are improving forecast accuracy through superior collaboration among internal and external stakeholders. Stepping out of the world of mathematical formulas into a world of human collaboration and compromise is what's delivering the value in today's demand planning efforts.
But even with embracing a collaborative process, your plan will never be 100 percent accurate. While you might be able to reduce forecasting error, better planning isn't going to reduce demand volatility.
So if you can't accurately plan demand, then you need to respond to it. As a result, strategies and supporting technologies for responding quickly and effectively to plan variations are becoming a corporate imperative. This requires:
Visibility into critical data - Connect directly to multiple, disparate ERP and other planning systems (internal or external to the organization) for a single view of demand and supply.
Alerts to urgent issues - Be immediately notified of changing supply and demand conditions and their potential operational and financial impact to the business.
Rapid calculations Model and assess various "what-if" demand scenarios in seconds. Collaborate across stakeholders to make the best decisions quickly.
How do companies get the right product at the right place at the right time in an environment of consistent flux?
Getting the right product at the right place at the right time is a more complex equation than ever before and is driving the consideration of more sophisticated demand management and inventory strategies such as postponement, supply allocation options, demand prioritization, and customer segmentation. All of this is done with the goal of better supply chain flexibility and responsiveness because the bottom line is that in most markets, availability trumps even price for comparable items. Forward-looking companies are considering ways to shorten the link between the demand signal and the demand response, and that's why a siloed and sequential demand planning and supply chain planning process shouldn't be on anyone's wish list this holiday season.