3 Steps to Achieve Demand Planning and Forecasting Excellence
The Business Challenge
Demand and capacity planning turns out to be a crucial factor when it comes to simplifying the logistics value chain. It’s growing popularity can be attributed to its ability to integrate smarter demand forecasting and predictive analytics into the capacity planning process. Unlike the obsolete demand forecasting processes where businesses had to rely solely on historic demand patterns to plan for future production needs, analytics-based capacity planning strategies empower businesses to tailor their production capacity to more accurate demand forecasts that account for numerous variables across the supply chain.
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The client wanted to leverage demand and capacity planning to reduce their average percentage error and drive productivity. One of the core objectives was to analyze and understand the demand patterns across various regions. To do so the client chose to partner with Quantzig to leverage its demand and capacity planning solutions to coordinate their capacity planning efforts in different countries, including rationalizing SKUs and consolidating suppliers.
Solutions Offered and Value Delivered
To help the client tackle their challenges, we developed a robust demand and capacity planning framework, which included recommendations for capacity management and safety stock optimization. By leveraging demand and capacity planning solutions, we successfully reduced the total average percentage error to less than 10%, while simultaneously improving capacity management. The result was a multi-step, holistic framework developed to optimize the client’s supply chain operations. However, a significant factor of success was the comprehensive consideration of costs, real-time demand patterns, and lead times when determining the best way to maximize ROI through capacity management.
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Furthermore, we also improved the accuracy of demand forecasts with added business constraints, such as minimum order quantity, ordering intervals, demand patterns, and total lead times to identify and quantify risks associated with out-of-stock scenarios. The use of analytics dashboards further improved the efficiency of their demand and capacity planning process.
Quantzig’s advanced analytics solutions also enabled the client to:
• Improve demand forecasting accuracy
• Overcome out-of-stock scenarios
• Improve production capacity
From demand forecasting to capacity planning, we have the expertise and the domain knowledge to address all your supply chain challenges. Contact us to know more about the benefits of our demand and capacity planning solutions.
Demand and capacity planning forms an integral part of any manufacturing business irrespective of its size. Every manufacturing facility benefits from the logistical and financial potential of demand and capacity planning methods. This method includes the systematic use of resources through a proper estimate of production needs. Demand and capacity planning help manufacturing businesses to identify underutilized resources and opportunities. Also, demand and capacity planning enable businesses to manage demand based on business priorities and make smart and well-informed decisions. However, coordinating supply with current demand is a daunting task for manufacturing companies and is influenced by several factors. Here in this article, our team of experts has highlighted a few factors to help companies optimize their production schedule and supply process and excel in the competitive business sphere.
Automating demand and capacity planning can help companies share updates in real-time across the supply chain and improve demand management. Get in touch with our experts to know more.
Top factors influencing demand and capacity planning
#1: Identifying the bottleneck
For efficient demand and capacity planning, it is important for companies to identify bottlenecks. To do this manufacturing businesses need to estimate the overall capacity relative to overall demand along with the capacity of individual resources. Also, skilled workforce is required as it plays a pivotal role in the chain of production and supply. This can further help in improving demand and capacity planning.
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#2: The unpredictability of constraints
Demand and capacity planning can be obstructed by the constraints such as inaccurate demand forecast, limited supply of raw material, unrealistic sales goals, and the unavailability of required skills. Therefore, to yield the desired outcome, it is important that companies conduct a thorough analysis of dynamic demand patterns and have accurately predicted the constraints.
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#3: Maximize capacity to meet demands
Without proper capacity planning strategies in place, it is difficult for businesses to deal with the variability in demand. Therefore, it is important that capacity should be maximized by adopting measures such as bringing equipment online that is not normally in use, outsourcing work to other suppliers temporarily, or switching workforce from one production area to another. Also, businesses can conduct realistic data analysis utilizing advanced supply chain data analytics solutions to make smart capacity planning decisions.
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LONDON: Quantzig, a leading analytics services provider, has announced the release of their latest storyboard on the importance of supply chain analytics and how it can help businesses in improving supply chain visibility and merchandising capabilities. In today’s competitive business scenario, companies find it difficult to monitor operations in real time and eliminate data silos. This is where supply chain analytics can come to the rescue.
By leveraging supply chain analytics solutions, companies can calibrate their entire supply chain network efficiently. Supply chain analytics can help companies in supply chain management and improve operational efficiency to facilitate quick time-to-market. Additionally, it can enhance the end-to-end performance of the supply chain and boost demand forecasting and logistics operations.
Quantzig’s analytics solutions have helped many leading companies to make smart and data-driven decisions and boost growth. Below, we have summarized some of Quantzig’s recent success stories for this week and have also highlighted ways in which supply chain analytics can help companies to analyze market demand, the impact of indirect supply chain cost and boost ROI.
#1. Supply chain analytics reduced distribution cost by about $8M: Identifying supply chain risks and opportunities by combining real-time datasets is a daunting task for businesses. But supply chain analytics solutions can make this task easier by precisely monitoring the performance data of suppliers through analytics dashboards. Also, supply chain analytics solutions can offer detailed insights into inventory and market demand. Furthermore, this can facilitate supply chain optimization and enhance supply chain flexibility.
#2. What are the benefits of supply chain analytics? Supply chain analytics can help organizations to achieve operational excellence in multiple activities ranging from procurement of raw material to order fulfilment. Also, by leveraging analytics solutions in supply chain companies can enhance their category management practices and consolidate the supplier base to minimize operational costs and improve contract compliance.
#3. Supply chain analytics minimized inefficiencies in supply chain management: Are obsolete inventory management systems leading to poor business outcomes? No more, as supply chain analytics is here to help you out. Supply chain analytics has the potential to help companies solve several complicated decisions by leveraging millions of decision variables, trade-offs, and restrictions. It can help in identifying the key opportunities to bring about improvements in profit margins. Furthermore, this can assist in optimizing supply chain operations by combining descriptive and prescriptive data sets.
Customized analytics dashboards can offer a 360-degree view of the supply chain operations. Request a FREE demo below to know more.
#4. Supply chain analytics eased the interpretation of market trends and enhanced operational efficiency: Catering to the growing demands while focusing on affordability is one of the major concerns for companies across industries. One of Quantzig’s clients faced a similar issue and approached Quantzig to leverage its expertise in offering supply chain analytics to bring about significant improvements in markdown percentages. Quantzig’s supply chain analytics solutions offered unparalleled visibility into the supply chain risks and demand uncertainty by interpreting the market trends in real-time.
#5. What’s new in supply chain analytics in 2019? Technological progress is becoming very important for companies in every sector. Supply chain management is also witnessing new trends and technologies every day. This makes it important for companies to understand the latest and existing trends to assess the benefits of evolving technologies and prioritize organizational goals. The advent of technologies like IoT and data unification in supply chain analytics has resulted in an accurate forecast of possible complications and better supply chain visibility.
#6. Supply chain analytics transformed the existing supply chain strategies and increased savings: Developing efficient supply chain strategies can be a cause of concern for businesses but you need not fear if you have a proper supply chain analytics solutions in place. A leading skincare products manufacturer was facing the same issue but experienced a great change in operations and savings by leveraging Quantzig’s supply chain analytics solutions. These solutions helped them to anticipate customer demand and accordingly regulate their inventory levels. Additionally, it assisted them in identifying top suppliers and in fine-tuning their existing strategies that resulted in increased savings.
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#7. What is the importance of supply chain analytics in today’s business environment? With the increasing pricing pressures and aggravating customer demands, companies across industries are facing predicaments in enhancing supply chain efficiency and operational speed. Companies need to evolve their supply chain execution systems and tweak their marketing techniques to accommodate the growing customer demands and dynamic market conditions. Supply chain analytics holds the solutions to all of these issues. It allows companies to analyze their supply chain data and identify the efficiency gaps. This, in turn, accelerates sales, speeds-up material movement, and improves supply chain standards.
#8. Supply chain analytics improved demand forecasting capabilities significantly: Do you really think devising an effective demand forecasting model to improve end-to-end supply chain visibility is a myth? If yes, then you must go take a look at Quantzig’s latest success story where one of its clients faced a similar predicament but realized a major improvement in their capabilities to forecast demand through the use of a suitable demand forecasting model. Furthermore, supply chain analytics solutions proved to be extremely helpful in providing end-to-end visibility on supply journey of each product.
#9. What are the key supply chain challenges? The growing complexity of business environment has forced companies to re-shape their business models. Due to such complexities, companies are facing multiple supply chain challenges increasingly complex patterns of consumer expectations and customer demand. Therefore, supply chain analytics has become the need of the hour for companies if they really want to stay ahead in the competition. It can aid companies to identify specific processes and analyze the potential areas of waste or inefficiency.
#10. Supply chain analytics solutions minimized inventory levels and checked vendor risks: Measuring the supply chain and vendor performance to increase profitability has become one of the major roadblocks for many companies. Are you facing the same problem? Supply chain analytics may hold the key to success. By leveraging analytics solutions in supply chain, companies can optimize their existing route and logistics operations to minimize inventory levels. Additionally, these solutions can help in measuring key vendors’ performance that can further help in mitigating future risks.
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What is demand forecasting?
Demand forecasting refers to the scientific and systematic estimation of the demand for a particular product in the future. Customer demand is highly dynamic and unless companies correctly chart out the demand patterns and determine the amount of goods to be produced, the chances of overstocking or understocking of goods are likely to occur. Leveraging demand forecasting techniques also helps companies to identify what customers are buying and improvise on products that are not faring well in the market.
Demand forecasting methods
Adopting demand forecasting methods helps companies to cope with seasonality, sudden changes in demand levels, price-cutting maneuvers of the competition, strikes, and other major swings of the economy. Here are some of the top demand forecasting methods that can help companies plan their production cycles smartly:
This is one of the most effective demand forecasting methods that use mathematical principles to predict consumer behavior based on the current or historical data. Predictive analytics leverages data on how a company’s products appeal to and interact with the customers. This analysis involves the interpretation of consumer trends and making assumptions based on recent/past trends. One of the major drawbacks of such demand forecasting methods is that the extrapolating current data doesn’t give insights into the future because of unforeseen problems that may occur.
The Delphi method is known to be one of the oldest demand forecasting methods used. In this technique, experts are surveyed anonymously. The survey includes several rounds, and after each round, a summary is formed, which is then converted into another question. These summaries and questions are then handed over to the experts, which can either sway their opinion or they can have it remain the same. This process is repeated multiple times until the experts arrive at a consensus on the decision.
Client intent surveys
Such demand forecasting methods are undertaken to identify what the customer intends to buy in the future. This is especially useful if the company is planning on introducing a new product to the market. You might often come across such surveys before entering a company’s website or accessing certain video contents. The questions are usually in the form of a scale to evaluate how likely their chances of are of purchasing a particular product.
It is important for companies to identify the most important attributes that consumers are considering when buying a product. Trade-offs are common in the case of most goods, hence, it is important that they identify why consumers are picking a certain product and what they value the most. Using demand forecasting methods, such as conjoint analysis, businesses can collect data on the most favorable attributes of an item, which will help find out what exactly consumers value more. They do this by having consumers rank their preferences of features, which then is translated into a report by an analyst that shows what customers prefer.
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What the Client Wanted
Identify and implement demand planning strategies to drive market growth and make their supply chain more streamlined. Also, the client was looking for an effective way to enhance revenue forecast, improve profitability, and align inventory levels with the peaks and troughs in demand.
Quantzig was approached by the medical device manufacturer to help them fine-tune their forecasting and demand planning methods. Our analytics experts helped the medical device company identify and implement the requisite improvements in their demand planning methods with a quick turnaround time of about four weeks.
This enabled the client to improve forecast accuracy, user productivity, and improve utilization. Quantzig aimed to assist the client to achieve its organizational objectives for operational efficiencies, enhances brand growth, and market excellence.
Market Overview for Top Medical Device Companies
The MedTech market changes constantly with new advancements and innovations in medical devices, IoT, medical IT, and healthcare technology. This has prompted top medical device companies to collaborate and develop medical devices that help save lives while meeting the regulatory requirements along with the industry standards.
The more you face supply and demand volatility, the more critical it is for you to interpret their impact and respond accordingly – and this is what top medical device companies have been facing for the past few years. However, effective demand planning is not an easy task, it requires organizations to admit their mistakes and move forward by implementing incessant improvement strategies to enhance business efficiency.
Though not utilized to its full impact, the use of analytics in demand planning is definitely the future worth investing in. Therefore, it is essential to leverage analytic solutions to be a part of a developing medical device industry by seeking an experienced company such as ours to assist you in your future endeavors.
Medical Device Industry Challenges
- Increasing complexity of medical devices: The complexity of medical devices is gradually increasing owing to the proliferation of advanced healthcare technologies in the field of wearable medical devices. The complexities of medical devices also complicated the diagnosis and repair process, which, in turn, results in an increase in the cost of field service.
- Growing competition: Globally, the competition from startups and spin-offs in the medical device industry has increased drastically, over the past few years. This has resulted in a decreased profit margin for manufacturers of medical devices. To tackle this, top medical device companies are now focusing on leveraging demand planning methods to fine-tune their strategies.
About the Client
One of the top medical device companies in the world.
Owing to the increasingly complex nature of businesses today, supply chain management methods are no longer adequate enough to make sense of data and help organizations adapt to the changes in demand volatility. The high promotional dependency of medical devices caused the demand to wax and wane by region and by market segment. The client – one of the top medical device companies – approached Quantzig to leverage its expertise in demand planning and devise demand planning strategies to increase sales and overcome wax and wane situations.
Demand Planning Benefits
The shortcomings of the traditional supply chain management systems are compelling top medical device companies to realize the importance of incorporating demand planning to predict future demand patterns and respond quickly to the changing customer needs and preferences. The recommended demand planning strategy enabled the client to respond proactively to market demand by transforming the requirements into actions.
Demand Planning Solution Insights
An efficient system that integrates the best supply and demand planning strategies means a radical departure from the traditional demand planning methods. This requires companies to redesign their entire system including the demand management strategies and demand forecasting methodologies to optimize and actively keep track of demands by integrating analytic methodologies to drive intelligent responses.
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Players in the retail industry are often posed with tough questions like how much of a certain merchandise to stock, which brand will sell the most, what is going to be the busiest time of the year. Some things might be easier to predict while others are almost impossible. However, that doesn’t stop retailers from using demand forecasting as the go-to tool for inventory planning and merchandising. Retailers have been using demand forecasting for a long time to improve their business operations. Still, only a few retailers are capable of producing a good forecast; thereby, improving their inventory planning. Here are some insider tips to improve your forecasting:
Understand the drivers
Many companies still assume that sales is what affects forecasting and thereby base all their forecasting on sales data. This is the most blindly followed statement in the retail industry as forecasts are actually driven by demand. The difference between sales and demand is minimal and you can run into trouble when you base your forecasting on sales. For instance, if you run out of a particular SKU for few months there will be zero sales. The sales data will thus reflect that there is no demand for the item so it is worthless to buy it.
Use right inventory management system
Inventory management has a significant impact on the forecasting accuracy. It is essential to know what’s happening in the warehouse to facilitate accurate demand forecasting. Consequently, it is important to find the right software and hardware to facilitate inventory management system. Executives should ask the right questions prior to investing in an inventory management system to enable better forecasting.
Understand the drivers of uncertainty
A company’s ability to accurately forecast demand depends on numerous factors. Analyzing these factors in advance helps companies plan ahead and create an accurate demand forecasting strategy. Manufacturers should also ask questions regarding the consistency of the demand, factors influencing the variables, levels of supply chain visibility, modes of transport available, and access to multiple modes of transport. Figuring out such uncertainty refines your forecasting, which enables companies to have a backup plan in place.
Measure and report forecast accuracy
A forecast will rarely be successful in the long term if the progress is not measured and reported to all stakeholders. Standard reports often offer detailed analysis which identifies strong and weak areas. One will only get to know the forecast accuracy when the forecast is compared to the actual result. Analyzing the variance will allow companies to identify what went wrong and thereby further tweak their forecast to get more accurate results.
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Predicting the future seems like an effort in vain. The predictions rarely turn out to be true due to some unforeseen circumstances or changes in the external environment. The same can be said for demand forecasting in the retail industry as well. However, retailers still carry out demand forecasting as it is essential for production planning, inventory management, and assessing future capacity requirements. Accurate demand forecasting provides businesses with valuable information about their potential in the current market to make informed decisions on pricing, market potential, and business growth strategies. The retail industry simply can’t survive without demand forecasting as they risk making poor decisions about their products and inventory, which might result in lost opportunities. So what trends are catching up in the retail industry with regards to demand forecasting?
Rising popularity of bottom-up forecasting
Today, the retail industry operates over multiple channels, which demands inventory positioning in numerous locations. As a result, retailers have to focus on bottom-up forecasting to meet the demand through various channels. Using such approach helps them fulfill orders from both e-commerce and traditional retail channels for a wide array of assortments. It enables the retailers to meet customer demand more quickly and deliver goods through the customers’ choice of channel. When the need arises, such approach can also allow retailers to balance inventory between stores and distribution centers through high-frequency inter-depot transfers.
Focus on forecast quality
Retailers usually look at demand signals when carrying out demand forecasting. However, retailers with less sophisticated planning capabilities often seek consistency in demand signals, which is often fragmented. As a result, they look for a unified model that allows all stakeholders to collaborate via “what-if” simulations. Consequently, retailers are looking to measure forecast quality by looking at external collaborations, including suppliers and end users to get better forecasts, which can then be shared with the sales team and suppliers.
Fresh view towards long-tail items
A majority of the long-tailed or slow-moving items sell because they are in inventory not because the forecast team made correct predictions. The key to master demand forecasting for slow-moving items is to ensure service levels for them. Such items cannot be planned reliably, so the retailers turn towards supply chain planning software to automatically model stock-to-service level, which accurately lists how much stock they need.
At a time when automation is gaining popularity, retailers are quick to put the burden of forecasting on automation. Since the retail industry operates on a very tight margin, they will possibly look to save on the cost of hiring planners as well. Automated demand planning applications can forecast future demand and add value to the business flawlessly. Additionally, retailers are turning towards cloud-based applications for their automation needs, which allows them to perform sophisticated forecasting without having to invest in IT infrastructure.
Returns are considered the dark side of e-commerce. Retailers incur significant reverse logistics cost and other additional products costs due to returns. Retailers are using sophisticated applications to help them predict returns and minimize them wherever possible. This helps them to reposition the returned goods across their inventory.
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The client: A wireless communication provider
Area of engagement: Supply and demand planning engagement
Wireless communication comprises of mobile phones and other wireless telecommunications devices such as wireless internet access and video. Lately, wireless communication has proven to be effective for the sustenance of businesses as it facilitates effective communication with end-users across the globe. Additionally, with the growing innovations in the telecom industry, organizations have started opting for Internet of Things in their applications to streamline their operations and deliver effective services. Furthermore, the rapid growth of the wireless telecommunication market can be attributed to the ease of access to smart mobile devices, growing internet penetration, and advances in wireless technology.
To efficiently bridge the demand-supply gap, organizations in the telecom industry space are opting for supply and demand planning solutions. These solutions assist organizations in forecasting the demand and supply and accordingly align their inventory levels to enhance profitability.
The Business Challenge
The client, a global wireless communication provider, wanted to balance the supply and demand gap to improve their finance and service objectives. Additionally, the wanted to understand the historical sales data and determine the best possible ways to fulfill the requirements of the target audience. With the help of Quantzig’s supply and demand planning solution, the client wanted to address issues pertaining to operational inefficiencies and missed opportunities.
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The Solution and the Business Impact
With the help of Quantzig’s supply and demand planning solution, the wireless communication provider identified ways to predict the forthcoming demand patterns and respond quickly to the changing customers’ needs. Additionally, the client re-aligned their supply chain and fulfilled the demand of the end-user segments. This further helped the client develop higher standards for both companies and customers.
Supply and Demand Planning Solutions Predictive Insights
Quantzig’s supply and demand planning solutions help firms across industries to efficiently sense and respond to the current market demand. These solutions also help companies to serve their customers better and improve customer relationships. Companies can also adopt technological solutions to improve their operational efficiency.
However, our analysis of the telecom industry space shows that wireless communication providers are facing challenges in terms of:
- Equipment costs: Wireless telecommunication services are considered expensive when compared to the conventional counterparts. Additionally, the extra costs involved in subscribing data services are forcing organizations to offer solutions at affordable costs while meeting the quality requirements.
- Security issues: Today, consumers have better access to a wide array of data services with the trend of digitization reaching its pinnacle. In contrast, unlimited access to data can make them vulnerable to potential threats. As a result, organizations in the wireless telecommunication space should look to ensure better security in terms of maintaining and handling the data.
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The client: Pharmaceutical industry player
Area of engagement: Demand forecasting
Typically, the pharmaceutical industry comprises of businesses involved in the research, development, manufacturing, and distribution of drugs. The drugs offered by these pharmaceutical industry firms play a fundamental role in improving the health, preventing health complications, and increasing the lifespan of individuals. The pharmaceutical industry also includes biologically-derived, over-the-counter (OTC), prescription-based products. Although the pharmaceutical industry is capital intensive and highly regulated, the industry is witnessing a high demand for innovations that would help reduce life-threatening conditions and diseases and further revolutionize patient treatment patterns in the coming years. Additionally, the increase in the number of middle-class population in both developed and emerging countries and higher disposable income and expectation of better healthcare solutions are driving the growth of the industry.
However, recent studies indicate that several factors are expected to influence the growth prospects of the pharmaceutical industry over the next couple of years. These factors include:
- Impact of globalization: Adhering to government regulations around taxation, trade, approvals, market access, and pricing continues to be a struggle for firms within the pharmaceutical industry space.
- Strict government regulations: The compliance requirements vary according to the countries, and firms are expected to ensure that these protocols are met before launching the products into the market. These variations in the compliance regulations are expected to pose problems for firms looking to invest in product innovations.
These factors are compelling pharmaceutical industry players to leverage the use of demand forecasting solutions. Demand forecasting solutions help firms identify the types of products and the quantity to be purchased. These solutions also assist companies in streamlining and optimizing the supply chain management activities.
The Business Challenge
The client, a leading pharmaceutical industry client, wanted to seek ways to devise reliable market forecasts and enhance the customer service levels. As a result, they wanted to predict and forecast the demand for healthcare products accurately and match the supply to demand. They also wanted to ensure that the goods are produced at the right time and delivered seamlessly. This is because the primary concern of the client was to coordinate the planning and marketing process to reduce inconsistency and error in the supply.
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Benefits of Demand Forecasting Solution
With the help of the demand forecasting solution offered by Quantzig, the client was able to predict their customer demand patterns and meet the production requirements. Additionally, the client was further able to consider the trends, seasonality, and the cost of production to reduce stock-outs. This helped them better manage their inventory.
- Drive substantial improvements in the supply chain performance
- Develop a robust inventory replenishment plan to offer consistent customer service
- Increase forecast accuracy
- Enhance version management capability