Concepts of Demand Management

Demand Sensing: Shortening the time to sense “true” market data to understand “true” market shifts in the demand response. This is in contrast to using order-to-shipment data that can have 1-3 weeks latency in translating “true” market (or channel) demand to action.

Demand Shaping: Applying techniques to stimulate market demand. This includes new product launch, price and revenue management, assortment, merchandising, placement, sales incentives, and marketing programs. These techniques to lift demand are seldom deployed singularly. Instead, they are usually deployed into the market together.

Demand Translation: Translating demand outside-in from the market to each role within the organization. The system design recognizes that the requirements for each—distribution, manufacturing and procurement— are different. In this process, the forecast is based on “the selling unit” into the channel with “ship-to modeling.” The demand is then translated to “ship-from” views based on the needs of the specific role.

Demand Orchestration: Making trade-offs market-to-market based on the right balance of demand risk and opportunity. These trade-off decisions depend on the use of advanced analytics to sense and shape demand simultaneously.

As companies mature, they must actively manage demand signals. In other words, they need to shape not shift demand. Practices like shifting demand from one period to another through advanced shipments or moving more products into the channel without stimulating base demand lead to supply chain waste.

The movement from demand planning to a more holistic process for demand management is dependent on the organization’s maturity in building demand-driven or market-driven value networks. No matter what the maturity level of the supply chain organization, the starting place to improve its potential is to reduce the bias and error in the tactical forecast. Demand planning is the foundation.

Lora Cecere (email: [email protected]) is the founder of Supply Chain Insights, a research and advisory firm specializing in supply chain management. She is co-author with Charles W. Chase Jr. of the new book Bricks Matter (John Wiley & Sons, 2013).

Read the article: A Practitioner’s Guide to Demand Planning