Inadequate Data and Error-Prone Forecasting Are Not an Unavoidable Part of Supply Chain Management
The pandemic may have shined a light on demand planning failures, but the fact is that supply chain management is challenging even in the best of times. Costly errors made by corporate giants like Kodak and Disney made the national news. They underlined the complexity of forecasting customer demand for a product or service, optimizing inventory levels, production schedules, and resource allocation.
Although the demand planning tools and processes used in each failed case may not be the sole culprit, there were warning signs that should have been heeded.
Do any of these scenarios ring familiar?
Your Content with Returning Forecasting Errors
Our first example is Disney and its decision to launch Quibi, a new video-streaming service. Only seven months after the 2020 launch of the purported short-form Netflix alternative, the platform shut down, falling hundreds of millions of dollars short of the $1.6 billion investment. Among many wrong decisions, the company overestimated production costs due to a demand forecast based on ideal sales rather than a multitude of factors that would align closer with reality.
Whether unable or unwilling to consider other scenarios, Disney executives could have benefited from better forecasting data. The same goes for Nintendo, which in 2017 misjudged demand for its new video game console, Nintendo Switch, creating a months-long shortage.
‘What If’ Scenario Planning Can Improve Forecast Accuracy
With so many variables at play, demand planning requires simulating scenarios and performing what-if analyses. By simulating different situations and assessing the corresponding outcomes, you can develop contingency plans and make informed decisions to mitigate risks and optimize resource allocation. If your current tools lack these capabilities, evaluating the potential impact of various scenarios and developing proactive strategies becomes challenging.
You Struggle to Stay Ahead of Market Trends
Like Blockbuster, Blackberry, and other corporate relics, Kodak failed to predict and adjust to market trends and consumer demand changes. The film camera company finally filed for bankruptcy in 2012, mainly because it didn’t anticipate the decline in demand for film as digital camera use rose.
Advanced Analytics Sput Continuous Improvements
Still, the trends that prompted Kodak’s infamous fall from grace were quite pronounced compared to the minute-to-minute shifts that most organizations must account for to avoid issues like stockouts or excess inventory. With access to advanced analytics, businesses can tap into and interpret the vast volumes of data that are key to optimized demand planning.
Rather than relying only on static historical data, such as past year’s sales figures, advanced analytics techniques — predictive modeling, AI, and machine learning that GAINS provides — can help businesses capture demand swings earlier and see emerging trends to generate more precise demand forecasts.
Demand planning should be an ongoing process. Regularly monitoring key performance indicators (KPIs), market trends, and customer preferences helps your organization stay proactive and make necessary and timely adjustments to demand plans and strategies.
You Lack Data to Pivot When Market Conditions Change
The arrival of COVID-19 uncovered the vulnerability of modern supply chain systems. The pandemic fallout hit practically every business, from global microchip shortages to toilet paper manufacturers.
Although disruption on that scale will always be hard to predict and prepare for, unexpected events should not, by design, catch your company or supply chain off guard. A lack of comprehensive, real-time data can, on its own, exacerbate a challenging situation. For instance, using spreadsheets for demand planning makes it considerably more difficult, if not impossible, to pivot rapidly in the face of sudden unexpected developments in your supply chain.
If your organization is experiencing any of the following, you are bound to struggle in the face of supply chain disruption, demand fluctuations, and other evolving variables:
- Lack of flexibility and scalability: Demand planning requirements change with business growth and market conditions. Suppose your current tools need more flexibility to accommodate the evolving needs of your business or can scale with increasing data volumes or complexity. In that case, it’s time to explore more agile solutions.
- Inefficient manual processes: If you primarily rely on manual data entry, spreadsheet-based calculations, or repetitive tasks, it can be time-consuming and error-prone. Investing in automated demand planning tools can streamline processes, reduce manual effort, and enhance overall efficiency.
- Limited visibility and collaboration: Inadequate visibility into demand-related data and insufficient cooperation between teams can hinder effective demand planning. If your current tools do not facilitate cross-functional collaboration or provide real-time access to data, it may be worth considering solutions that foster transparency and collaboration.
Integrated Technology Solutions Can Boost Data Accuracy and Accelerate Response Times
An integrated demand planning and supply chain management solution can address the shortcomings of your current tools. GAINS’ comprehensive supply chain planning and optimization suite provides highly accurate baseline forecasts and facilitates synchronized planning across the organization, expediting supply chain response time and enhancing overall operational efficiency.
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How could your business benefit from a new take on demand planning? Contact us to start a conversation.
