Tag: retail

Demand Sensing And Demand Shaping

Forecasting and planning is a challenge in the best of times. The times we are in make this a herculean task. Market demand shifts continually as economic conditions change, products change, prices fluctuate, competitors act, new products are introduced, marketing creates promotions,……. The list is quite endless. Current planning and forecasting methods are reactive and struggle to keep up with these shifts.

The solution is “Demand sensing and Demand Shaping” – active methods to predict what demand will arise and keep ahead of the market. Demand sensing is the ability to detect what choices customers are buying patterns and the trends associated with these choices. Demand sensing can help you to quickly see market shifts to plan your product mix and offering.

Customer Buying Patterns "Customers who bought this SKU also bought this other SKU"

Demand shaping is the ability to guide customers to the best choices at point-of-sale. This is the key to increase revenue and supply chain efficiency. However, demand shaping needs product intelligence at point-of-sale to guide customers to the best choices. Some of the ways to demand shape are –

1. If you offer many products or SKUs, there are typically strong buying patterns in the demand. For example – This printer is often bought with this unbleached paper, this ink cartridge and cable. Then, when a customer selects the printer at point of sale, you want to automatically show him the other items that have strong buying patterns. The customer will thank you for this recommendation because usually they need this additional stuff, and you just saved him a ton of effort thinking about it, and a ton of time searching for it. And you made more money in this sale!
2. If you offer a product with many attributes, every sale will begin with the customer calling out a few attributes. The opportunity to demand shape is to recommend a good choice based on the partial list of attributes the customer has called out. Demand Shaping requires the ability to complete the order with the right attributes. The best way to complete the order is to have sales intelligence these attributes are bought with these other attributes. It is the Amazon-esque way to look at products with many attributes.
3. The biggest opportunity of Demand Shaping is guiding customers to close-enough SKUs. Most customers describe the products they want to buy with a ‘kinda-sorta’ attribute description. As the number of product features grow, there are a large number of SKUs that are similar or close-enough that they can satisfy the customer. So there is a significant opportunity to guide a customer to a similar or close-enough SKU at the point of sale. The recommended SKU may differ in attributes that the customer did not “call out” or specify. If you can offer up this SKU it is a win-win. You have served the customer. You have won the sale. You have moved your inventory. And your competitor did not get this customer.

As product choices and the number of SKUs grow, these techniques are mandatory for an efficient supply chain and for a good customer experience in this customer-centric world.

I just read an article by Mark Pearson, Six secrets of Supply Chain Planning Masters.

Quoting Mark Pearson’s article – Think of demand sensing as predicting what demand will arise, as opposed to simply reacting to incoming orders. Shaping demand, on the other hand, is all about steering customers toward available products and services. Compared to laggards, more than four times as many masters said they can predict demand with greater than 80 percent accuracy levels. And nearly twice as many masters said their ability to shape demand was “good” or “excellent.

Comments Off