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Demand Sensing greatly improves forecast accuracy

CSCMP’s Supply Chain Quarterly

August 18, 2011

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Demand sensing software can dramatically improve companies' forecasts of the amount of goods they need to place on retail shelves, according to Forecasting Performance Benchmarking Study—2011, a new report from supply chain software vendor Terra Technology. For the report, the software firm reviewed more than 7 billion physical cases of product, representing more than $200 billion in sales in 2009 and 2010 for nine leading consumer packaged goods (CPG) manufacturers. Those companies account for more than one-third of all CPG sales in North America.

Unlike traditional forecasting, which relies on historical sales data, demand sensing is a forecasting method that batches daily point-of-sales data and other relevant information, such as inventory levels, in its mathematical calculations to forecast demand for products. The study found that the demand sensing approach reduced the manufacturers' average weekly forecast errors by 40 percent for the period 2009 to 2010.