Businesses are constantly navigating through the shifting terrain of the global economy, which brings forth the challenge of adapting to changing market conditions and consumer preferences. To tackle this challenge, demand planners must possess a crucial skill known as demand sensing. This skill empowers them to optimize their forecasts and swiftly respond to the ever-evolving market landscape.
In the past, businesses traditionally relied on historical data and statistical models to forecast future demand. However, these methods often failed to capture real-time fluctuations and unexpected events. That’s where demand sensing comes in. It provides a modern solution that enables agile businesses to have real-time forecasting capabilities.
Demand sensing is an advanced analytical approach that combines real-time data, external factors, and machine learning algorithms to generate more accurate demand forecasts. Unlike traditional methods that rely solely on historical data, demand sensing considers dynamic factors like social media trends, weather patterns, promotions, and competitor activities to provide timely insights. By incorporating this approach into their supply chain operations, businesses can make well-informed decisions and quickly adapt to shifts in consumer demand.
Aspects that Influence Demand Sensing
Demand sensing is influenced by various factors that play a crucial role in predicting demand. Let’s explore these key factors:
Understand Your Business’s Market and Environment
To accurately assess the impact of external factors on demand forecasting, it is crucial to have a deep understanding of your business’s market and environment. This involves identifying external influences that can affect demand, such as economic changes, market trends, and shifts in consumer behavior patterns. Once these factors are identified, diligent tracking of their impact on demand can commence.
Track and Analyze Historical Data
To gauge the influence of external factors on demand sensing, it is crucial to track and analyze past data. Historical data provides insights into how external factors have impacted demand previously. By scrutinizing historical data, you can identify trends, patterns, and correlations between external factors and demand. This knowledge enables you to create precise demand forecasts that take into account external influences.
Consider Economic Indicators
Economic indicators play a vital role in forecasting demand. These indicators encompass various factors like GDP, inflation rates, and consumer confidence. By analyzing these indicators, businesses gain valuable insights into consumer spending habits, enabling them to accurately predict the demand for their products and services. Monitoring economic indicators also allows companies to adapt their demand sensing strategies according to changes in the overall economy.
There is a clear and undeniable relationship between price and demand. The retail demand for a product is influenced by its price, as changes in price predominantly affect consumer behavior. However, what’s intriguing is that now you have the power to influence demand by strategically choosing an optimal price point, rather than solely relying on changes in demand based on price fluctuations.
Events and Promotions
To effectively evaluate the impact of a promotion and gauge customer response to a campaign, it’s crucial to analyze insights related to the promoted products. This analysis not only helps in anticipating demand for future promotions but also allows you to understand how promotions on one category of goods may affect demand for other related product categories. By actively monitoring and anticipating this information, you can strategically plan your upcoming campaigns.
Demand patterns have always been shaped by important holidays and occasions. While businesses typically consider the seasonal factors that impact demand forecasts, it’s essential to ensure a seamless integration of these factors. By leveraging AI-based automation technologies, you can effectively account for the influence of holidays like Valentine’s Day, Mother’s Day, Christmas, and more on demand. Furthermore, accurate demand sensing becomes invaluable in tracking geographic-specific events such as regional sporting competitions.
Monitor Weather Conditions
Certain products and services are strongly impacted by weather conditions. For instance, during the winter months, there is an increase in demand for snow shovels and winter coats. By closely monitoring weather conditions, you can appropriately adjust your demand forecasting strategies to align with seasonal fluctuations in consumer demand. Additionally, utilizing predictive analytics based on weather patterns can help generate accurate demand forecasts.
Count in Holidays
The Christmas season has a strong impact on consumer behavior, leading to increased demand for gift items, decorations, and other holiday-related products. As a business owner, it is crucial to ensure that you have sufficient inventory during this profitable time of the year. Running out of stock can result in missed opportunities to serve customers ranging from early birds to last-minute shoppers.
Monitor Consumer Behavior Patterns
Consumer behavior patterns can also impact demand for products and services. By monitoring consumer behavior patterns, you can identify changes in demand and adjust your demand planning strategies accordingly. For example, if consumers are becoming more health-conscious, demand for healthy food options may increase. By tracking consumer behavior patterns, you can adjust your inventory and production schedules to reflect changes in demand.
About the Company
Fountain9 provides advanced demand forecasting software specifically designed for the food and beverage industry. Their software includes a demand sensing module that uses 9 unique factors to generate accurate forecasts. These factors consider various elements such as holidays, markdown events, pricing changes, seasonality, and historical sales trends. With this tailored demand forecasting software, businesses can optimize their inventory management to avoid both overstocking and understocking. By ensuring that demand is met at the right time, companies can prevent missed sales opportunities, minimize losses, and improve customer satisfaction.