What is Demand Sensing?

Step Change in Forecast Accuracy

Demand planning error for consumer products companies is shockingly high at close to 50%. The root cause is the use of time-series analysis of historical sales information. Historical sales are poor indicators of future sales in the best of times, but are particularly ineffective during volatile markets. So adding yet more statistical complexity or another year of historical data is just another wrong answer to the wrong problem.

Solving the problem requires access to current demand signals - including orders, shipments and other daily supply chain data. The net result - Demand Sensing reduces short-term forecast error by up to 40%.

Accuracy Where It Matters Most

Typically 80% of the cost of goods sold (COGS) is associated with activities that take place within the next 6 weeks. Using better math to improve outcomes related to the bulk of the COGS makes good business sense. Demand Sensing mathematics are particularly well suited for the first 6 weeks, providing the biggest benefit for the bulk of the costs. Let the engine do labor-intensive analysis and free up planners to focus on more productive longer-term strategic activities.

Procter & Gamble

“This is certainly true for our consumer products, which have very short production and order lead times. So we can always deliver from stock. Likewise with other product categories, production and order lead times are very short.”

Niles Mueller
Global IDF Initiative Manager
Procter & Gamble
Business Logistics, June 2010

Across Your Entire Business

Demand Sensing is effective across all products categories and locations:

  • High velocity and low velocity items
  • Promotions
  • New product introductions
  • National and global
  • Modern trade and general trade
Unilever

“The initial implementation was in our retail business, which is our largest business in North America. We clearly exceeded our objectives:

  • Improved forecast by 40% on average (7 day horizon)
  • Removed 5 days of finished goods safety stock
  • Significant freight savings
  • Touchless

We have a global rollout in progress.”

Doug Sloan
Director of Supply Chain Operations Support, Unilever
Consumer Goods Technology
September 29, 2010